THE FUTURE OF TH - Ewing Marion Kauffman Foundationentire industries—Stanford and the Silicon Valley being the shining examples. All of the presenters touched on this topic to some

THE FUTURE OFTHE RESEARC H U NIVERSITYMeeting the G lobal Challenges of the 21st Century

4801 Rockhi l l RoadKansas Ci ty, Missour i 64110

www.kauf fman.org

© 2008 by the Ewing Marion Kauffman Foundation. All rights reserved.

The Future of the Research UniversityM e e t i ng t h e G l o b a l C h a l l e nges o f t h e 21st C e n t ur y

A volume of scholarly papers addressing the future

of the university for the entrepreneurial age, presented at the

2008 Kauffman-Planck Summit on Entrepreneurship Research and Policy

held June 8-11, 2008, in Bavaria, Germany.

Table of Contents

IntroductionThe Future of the University and Public Research ................................................5for the Entrepreneurial Age

by Carl J. Schramm

A View from the United StatesBuilding an Entrepreneurial University ...............................................................11

by Michael M. Crow

Building a G lobal University ................................................................................31by Alan Merten

A View from EuropeThe Futures of Universities in Europe..................................................................38

by Thomas Andersson

For G erman Universities, a Time of Sweeping Change .......................................48by Axel Freimuth

Tertiary Education Institutions in Times of Change: ...........................................55A Systems Approach to Institutional Transformation

by Manuel Heitor

The Future of the European University: ..............................................................68Issues, Entrepreneurship, and Alliances

by Wolfgang Herrmann

Moving from a Managed Economy to an ...........................................................75Entrepreneurial Economy: The Challenge for Europe and its Universities

by Jan Willem Oosterwijk

A View from IsraelEntrepreneurial Universities: The View from Israel .............................................84

by Manuel Trajtenberg

Additional Papers

University Alert: The Information Railroad is Coming ........................................95by William Wulf

The Role of the G lobal University In Accelerating ............................................110D iscovery-to-Product in BioPharmaceuticals:Some ‘Black Swan’ Scenarios

by Frank Douglas

Should Universities Be Agents of Economic D evelopment?..............................123by Robert E. Litan and Lesa Mitchell

Summary of D iscussion ...........................................................................139

[ 3 ]

[ 4 ]

i n t r o d u c t i o n

“The importance of theentrepreneur was long the

not-so-secret—if ofteninsufficiently appreciated—

key to the success of theAmerican economy. Now,entrepreneurship is drivinggrowth everywhere—fromIsrael to Ireland, Taiwan toTurkey, and, of course, in

India and China.”

–Carl J. Schramm

[ 5 ][ 5 ]


The Future of the University and Public Research for the Entrepreneurial Age

by Carl J. SchrammPresident and Chief Executive OfficerEwing Marion Kauffman Foundation

It is commonplace to say that we live in the Information Age—and no less

true because of t-repeated . But also no less true—yet hardly ever

repeated—is the fact that we live in an Entrepreneurial Age . How these

two basic trends—the dominant forces o f our time—in tersect is the topic o f

this volume , and of the conference on which it is based .

Apart from fringe anti-globalization activists, nearly every observer today holdsthat the Information Age is a good thing. It is raising living standards, alleviatingpoverty, expanding opportunity, increasing the wealth of nations, improvingproductivity, reducing the potential for conflict, and enhancing quality of life. A ll this isw idely understood.

The basic realities of the Entrepreneurial Age are not as well appreciated,though they are arguably even more powerful—and inarguably wholly intertw ined w iththe fate of the information revolution. Consider: World GDP has grown more thantenfold since 1970—and four-fifths of that growth has occurred since countries in thedeveloping world and those once behind the Iron Curtain began to liberalize theireconomies. This is, to say the least, not a coincidence. Where there is economic

[ 6 ]


freedom—where individuals w ith ideas and drive can pursue their dreams—money ismade, capital is formed, and the pie expands.

The importance of the entrepreneur was long the not-so-secret—if ofteninsufficiently appreciated—key to the success of the American economy. Now,entrepreneurship is driving growth everywhere—from Israel to Ireland, Taiwan to Turkey,and, of course, in India and China. Even the mature economies of the O ld World—longenamored of central planning and tight coordination between big business and biggovernment—are getting into the act, under the ambitious goals of the Lisbon Agenda.

Yet there is reason for concern. In the Information Age—when wealth,progress, and success are more than ever derived from the mind rather than the soil—how well are the chief repositories of information, our universities, keeping up? Howwell do they understand, and incubate, and practice, entrepreneurship themselves? Aretoday’s universities equipped to support and augment the world’s burgeoning culture ofentrepreneurship? And, if not, how can we help them become so?

More specifically, the tw in engines of entrepreneurship and the know ledgeeconomy have ushered in many radical innovations: new forms of technology—from IT

to biotech—new patterns in society, new demands on theworkplace, even new modes of living. Universities wereinstrumental in developing much of this radical innovation,but how well have they kept up w ith its transformativeimpact?

Rising living standards enable more and morepeople throughout the world to earn a university education.The demands of the know ledge economy make such aneducation more and more valuable—and outright necessaryfor certain careers. A result has been massive demographic

change on campuses. Vastly more students are coming to study, and their backgroundsare more diverse than ever, by every measure, whether age, ethnic group, or socio-economic status. How are the universities adapting to this fundamental change amongtheir “consumer base,” as it were?

Finally, universities are no longer self-contained. It is not so much that the IvoryTower has been breached; more that every individual tower is now linked to every other inways, and to a degree, that are unprecedented. Competition—for students, for faculty, forresearch funds, even for attention—is at a fever pitch. And it is no longer merely regional,or intra-state, or even national. That competition is now global, and becoming more so.

Rising living standardsenable more and morepeople throughout the world to earn auniversity education.The demands of theknowledge economymake such an educationmore and morevaluable.

[ 7 ]


The Kauffman Foundation and the Max Planck Institute convened a conferencein the summer of 2008 to explore just these issues. We brought together more than adozen leading experts from Europe, Israel, and the United States—presidents ofuniversities, renowned researchers, people steeped in the mission of what a universityshould be. They brought diverse perspectives and unique insights, but several commonthemes emerged.

Manuel Trajtenberg—professor of economics at Tel Aviv University—crystallized the framework for thinking about these issues by observing that“entrepreneurial university” really has three possible meanings.

First is the extent to which universities areinnovative in terms of their own institutions, how theyare structured and governed, and how they adapt to change. Second is the extent towhich universities can drive entrepreneurship in the broader economy by generatingideas, training entrepreneurs, and working w ith the business community. The thirdsense of universities as entrepreneurial institutions is their ability to effect broaderchange throughout society at large.

Few would disagree that universities have lagged considerably atentrepreneurship in the first sense—at reforming themselves. As robust as they can beas agents of change for the world around them, they remain stubbornly resistant tochange w ithin their own walls. But for universities to fully and effectively becomeentrepreneurial in the second sense, they w ill have to embrace entrepreneurship in thefirst sense.

Our presenters understand that. Three of Europe’s most innovative universitypresidents led off the conference, described the obstacles to change, and voiced theirdetermination to overcome them. M ichael Crow recounted his efforts to transformArizona State, up to and including abolishing academic departments, creating newones, and even helping to found entirely new disciplines. And A lan Merten explained allthe ways in which his own university—George Mason—has changed over the pastdecade, and is now “going global. ”

The second sense—explicitly fostering entrepreneurship in business—is moreproblematic. Universities never have been at ease embracing this role, preferring tokeep their distance from the private sector and instead partner w ith government or

For universities to fullyand effectively becomeentrepreneurial in thesecond sense, they will have to embraceentrepreneurship in the first sense.

[ 8 ]


other nonprofits. Yet, whatever misgivings its inhabitants may have, the university playsa vital role in nurturing entrepreneurship. It trains the scientists who make thegroundbreaking theoretical discoveries, the engineers who find practical applications forthose discoveries, the businessmen who bring those applications to market, and themanagers who keep those businesses running. A ll this is done w ithout any consciousplan. In some cases, universities end up as primary conduits of talent and ideas forentire industries—Stanford and the Silicon Valley being the shining examples.

A ll of the presenters touched on this topic to some extent, but three did somost directly. Jan W illem Oosterw ijk—president of Erasmus University in Rotterdam—talked about the university’s history in fostering entrepreneurship, and described a newuniversity and private sector partnership specifically geared to building a culture ofentrepreneurship in Dutch society. Robert Litan and Lesa M itchell—both of the

Kauffman Foundation—raised the question of whetherthis direct approach is desirable, only to answer w ith aquick and emphatic, “yes. ” The bulk of their discussionthen focused on the “how:” getting the approach, andthe mix, right.

Universities have clearly exhibited great facility atentrepreneurship in the third sense, changing the societiesaround them mostly—but not always—for the better.

Indeed, the gains of the know ledge economy are inconceivable in the absence of highquality, and w idely available, post-secondary schooling. Universities also have acted asagents of social change, bringing new opportunity to formerly marginalized groups.

Several of the conference speakers explored this aspect of the university’s role.W illiam Wulf, one of America’s leading computer scientists, showed how so many ofthe technological innovations that have revolutionized society, business, and everydaylife originated on campuses and in labs. Manuel Heitor, education minister for thegovernment of Portugal, made an aggressive case for greater direct involvementbetween universities and the societies they serve. And Frank Douglas, senior fellow atthe Kauffman Foundation and one of the world’s most distinguished biotechresearchers, laid out a hopeful vision of how universities could take a leading role in arevolutionary new approach to finding a cancer cure.

The papers and the discussion that follow explore these and many other facetsof what it means to be an entrepreneurial university. They define the questions and

The gains of theknowledge economy areinconceivable in theabsence of high quality,and widely available,post-secondaryschooling.

[ 9 ]


propose answers, in the process shedding much light on one of the most importantchallenges facing the university in our time.

Thanks go to David Audretsch of the Max Planck Institute, and to Robert Litanand Lesa M itchell of the Kauffman Foundation, for organizing this conference. Theconference also greatly benefited from the participation of the many other experts whoattended.

This volume doesn’t have all the answers. But know ing the right questions,and understanding them, is the necessary first step toward w isdom.

[ 10 ]

“There are approximately 5,000 institutions of higher

education in the United Statesand, of these, roughly 150,

both public and private, are classified as “research

extensive” in the classificationestablished by the Carnegie

Foundation for HigherEducation. These are the

institutions that increasinglyfuel the national economy by

producing leaders in allsectors of academia, business,industry, and government, andthrough perpetual innovationin products and processes.”

–Michael M. Crow

a v i e w f r o m t h e u n i t e d s t a t e s

[ 11 ]


Enterprise ” is a concept sometimes wholly lacking in discussions about

higher education and the American research university. “ Academic

enterprise ” and the entrepreneurial academic culture that such an

orientation instills encourage creativity and innovation with intellectual

capital—the primary asset of every college and university.

Generally associated w ith the private sector, the spirit of enterprise isnonetheless highly relevant to the advancement of all of our nation’s colleges anduniversities, but especially our research universities—institutions dedicated to bothteaching and discovery. There are approximately 5,000 institutions of higher educationin the United States and, of these, roughly 150, both public and private, are classifiedas “research extensive” in the classification established by the Carnegie Foundation forHigher Education. These are the institutions that increasingly fuel the national economyby producing leaders in all sectors of academia, business, industry, and government,and through perpetual innovation in products and processes.

Building an Entrepreneurial University

by Michael M. CrowPresident, Arizona State University

M ichael Crow is the president of Arizona State University. Prior to joining ASU in 2002, hewas executive vice provost of Columbia University, where he also was professor of science andtechnology policy. As chief strategist of Columbia’s research enterprise, he led technology andinnovation transfer operations and the establishment of large-scale interdisciplinary research initiatives. A fellow of the National Academy of Public Administration, he is the author of books and articles onresearch organizations, technology transfer, and public policy as it relates to science and technology. Heholds a BA from Iowa State University and a PhD in Public Administration from Syracuse University.

“

[ 12 ]


Since becoming the president of Arizona State University in July 2002, I havebeen leading an effort to reconceptualize a large public university as an academicenterprise—agile, competitive, adaptable, and responsive to the changing needs bothof our constituencies and global society alike. The speed w ith which we now make andimplement decisions and establish collaborative relationships w ith other academicinstitutions, and w ith business and industry, is characteristic of private enterprise. As anenterprise, we acknow ledge and embrace the fact that we operate in a competitivearena. We are competing not only for research dollars and private investment, but also for the very best students, faculty, and administrators, and above all, for the verybest ideas.

Instilling the spirit of enterprise into the institutional culture of a publicuniversity is only one of my objectives as the president of an emerging researchinstitution. The larger task we have taken on is to redefine public higher educationthrough the creation of a prototype solution-focused institution that combines thehighest level of academic excellence, maximum societal impact, and inclusiveness to asbroad a demographic as possible. Predicated thus on excellence, access, and impact,the paradigm is conceptually framed as the “New American University. ”

The spirit of enterprise I endorse therefore must be integrated into a largercontext. Academic enterprise is only one of eight “design aspirations” for the NewAmerican University. There are many ways to parse the concept of the New American

University, but, in brief, its objectives are inherent in thefollow ing guidelines that, reduced to their essential terms,enjoin the academic community to (1) embrace thecultural, socioeconomic, and physical setting of theinstitution; (2) become a force for societal transformation;(3) pursue a culture of academic enterprise and know ledgeentrepreneurship; (4) conduct use-inspired research; (5)focus on the individual in a milieu of intellectual andcultural diversity; (6) transcend disciplinary limitations inpursuit of intellectual fusion; (7) socially embed the

university, thereby advancing social enterprise development through direct engagement;and (8) advance global engagement. Taken together, these comprise a paradigm foracademic institutions, both public and private, that I advocate w ithout reservation. A llof the design aspirations are interrelated, but in the follow ing I w ill focus primarily onacademic enterprise. Before we consider our efforts to rethink the contemporary

We are competing notonly for research dollarsand private investment,but also for the verybest students, faculty,and administrators, andabove all, for the verybest ideas.

[ 13 ]


American research university, the follow ing brief historical overview of the institutionalform w ill set the context for a discussion of its present design flaws and the imperativefor its reconceptualization.

The Evolutionary Trajectory of the American Research University

W ith a global population of 6.5 billion projected to increase to 8.5 billion bymid-century, we face challenges of unimaginable complexity, both as a species and,more narrow ly, in terms of our standard of living andquality of life as a nation. But we strive to denycomplexity in our national policymaking and planning,and, rather than learning to understand and managecomplexity in the academy, we restrict our focus w ithever-greater specialization and the narrow ing ofdisciplines. Our universities remain highly static, resistantto change, unw illing to evolve in pace w ith real time, andfocused primarily on their advancement of abstractknow ledge. The organizational frameworks we calluniversities—this thousand-year-old institutional form—have not been designed to accommodate change on thescale we are w itnessing or the attendant increases incomplexity. Moreover, organizational constraints derived from the flawed institutionaldesign of our colleges and universities prevent them from realizing their entrepreneurialpotential. In order for our universities to overcome their ossification, academicenterprise must become a new organizing principle, both organizationally andconceptually. American research universities need not remain static, monolithicbehemoths, unw illing or unable to advance their own institutional evolution or tocatalyze positive societal transformation.

The evolutionary trajectory of universities in the Western world can bemodeled as a process visualized along two axes. The x-axis represents the scale of theinstitution, w ith scale meaning more than just size. Scale in this usage refers to thebreadth of functionality, which measures more than just the number of disciplinesstudied. If the institution is a comprehensive know ledge enterprise such as the NewAmerican University, it w ill be committed to the traditional missions of teaching,research, and public service, but, in addition, w ill advance innovation andentrepreneurship. Scale thus refers to both the intellectual, or pedagogical, and

W ith a global populationof 6.5 billion projectedto increase to 8.5 billionby mid-century,we face challenges of unimaginablecomplexity, both as a species and, morenarrowly, in terms of our standard of livingand quality of life as a nation.

[ 14 ]


functional breadth. The y-axis, meanwhile, reflects the institution’s conception of itselfas an evolving, entrepreneurial entity. At the low end of the y-axis, we have whatorganizational theorists call conserving institutions, those that are inwardly focused,risk-averse, and concerned primarily w ith self-preservation. At the upper end areentrepreneurial institutions, those w illing to adapt, innovate, and take risks in rethinkingtheir identities and roles. In the follow ing chart, the New American University appears inthe curve in the upper-right quadrant reserved for leading-edge institutions designed toaccommodate innovation, rapid decision-making, and entrepreneurial behavior.

A brief historical overview of the lineage of our universities—in a sense, ourinstitutional genetic code—demonstrates the dynamics between scale and innovation.On the hills around Athens in Greece, academies formed more than 2,400 years agowhen individuals of astonishing intellect like Socrates and Plato and Aristotle assembledand began to conceptualize and advance the core pedagogical methodology that westill use to the present day. The ancient Greek academies developed the capacity tounderstand nature and society in complex terms, but they were tiny in scale andexclusively “ conservative, ” in the sense of entrusting themselves to conserve

TRANSFORMATION

SMALL SCALELARGE SCALE

INNOVATIVE HIGH RISK

CONSERVING LOW RISK

GREEK ACA DEMIES

EUROPEAN MEDIEVALU NIVERSITIES

GERMAN RESEARC H U NIVERSITIES

AMERICAN RESEARC H U NIVERSITIES

LAN D GRANTU NIVERSITIES

NEW AMERICANU NIVERSITY

LEADING EDGEINNOVATIVEUNIVERSITIES

[ 15 ]


know ledge. The ancient academies had little impetus to disseminate know ledge beyondtheir small circles and no conception of the notion of risk and reward.

Fast-forward 1,500 years: The first universities begin to emerge. Bologna,probably the oldest university in the Western world, was established in the eleventhcentury, followed by the University of Paris and, soon thereafter, Oxford andCambridge; institutions like Uppsala University, in Sweden, and Jagiellonian University,in Krakow, become great centers of learning. W ithin this ethos, universities emerged asorganizations focused on discovery. Our very understanding of who we are as a speciesand our place in the universe is the product of scholars and scientists working in thesegreat institutions. In the office of the rector of Jagiellonian University, an institutionestablished in 1364, one can find the instruments that Copernicus used to determinethat the Earth was not the center of the universe. The medieval European universitieswere slightly larger in scale and only slightly more focused on disseminating know ledge.These institutions had only the most limited concept of risk and reward.

Fast-forward again to the late eighteenth century: Industrialization in Europebegins to transform the socioeconomic and cultural landscape, spreading from GreatBritain throughout Western Europe, and especially into central and northern Germany.Driven largely by industrial competition and the emergence of the notion of efficienttechnology-driven competitiveness, the German universities that arose in the eighteenthcentury focused on specialized scientific research and were thus the predecessors ofAmerican research universities, but, w ith few exceptions, entrepreneurship was still littlein evidence.

The prototype for the American research university was established in 1876 byJohns Hopkins University, which combined the traditional American undergraduateliberal arts college w ith the German model of the elite scientific research instituteoffering specialized graduate training. The American research university thus came intobeing in the decades between 1876 and 1915. During this formative period, existingmature universities redefined themselves as research-grade institutions and newinstitutions were established on the Hopkins prototype. The roster includes institutionsthat set the standard for the American research university, including Harvard, Columbia,M ichigan, Illinois, California, Stanford, Chicago, MIT, and others. Some of these wereland-grant universities established under the Morrill Act. W ith their connection to large-scale agricultural research, these were among the first universities to explicitly take on abroader functional mission, that of advancing the “agricultural and mechanical arts” forthe growth of the country. Rather than focus on teaching the classics to the privileged,

[ 16 ]


the land-grant institutions became involved in production agriculture and thus furtheradvanced the model of the entrepreneurial university. The land-grant schools had thecapacity to create products and processes and other forms of capital that could be soldand used by consumers outside the university system, and entrepreneurship came tothe forefront. Follow ing the example of these pioneering institutions, universities likeStanford and MIT committed themselves to entrepreneurial risk-taking and prospered.

The establishment of the prototype of the American research university was acritical evolutionary step in the growth and development of universities, setting thepattern for intense and focused discovery across all disciplines, the emergence ofAmerican-style graduate study leading to advanced degrees, including the PhD, and theemergence of the professoriate as both teachers and practitioners. The important pointin this sketchy historical overview is that institutions of higher learning, like allorganizations, are evolving entities. To the extent that they can adapt to a changingenvironment or, better yet, lead the change, they survive and flourish. Like otherorganizations, they also must be wary of institutional inertia, the resistance to changethat almost certainly would bring about their demise.

Institutional inertia is nowhere more evident than in the academic valorizationof increasingly specialized know ledge. In our effort to produce abstract know ledgew ithout regard for its impact, many universities have lost sight of the fact that they arealso institutions w ith the capacity to create products and processes and ideas w ithentrepreneurial potential. Prestige always w ill attach to the pursuit of the unknown, butI would argue that we must reprioritize our practices and rethink our assumptions if weare not to minimize the potential contributions of academic enterprise. Through some

strange elitist logic, the concept of entrepreneurship hasbeen eradicated from institutions of higher education inthis nation. I would argue that we have been excessivelyattached to our lineage from the academies of ancientGreece and the medieval European universities. We mustinstead design some of our institutions to allow us to becompetitive and address the challenges that w ill confrontglobal society in the decades ahead. Our universities must

recover an entrepreneurial edge if they are to be relevant and useful on a global scale.Yet, however significant the potential of their contributions to societal advancement,entrepreneurial universities must first expand access to a broader demographic if theirimpact is not to be diminished.

Institutional inertia isnowhere more evidentthan in the academicvalorization ofincreasingly specializedknowledge.

[ 17 ]


D ilemma: Excellence or Access?Research universities both in the United States and around the world are the

primary sources of the know ledge and innovation that have driven the global economyand provided those of us in advanced nations w ith the standard of living that we havecome to take for granted. But in America and elsewhere, leading institutions tend to beexclusive—that is to say, they define their excellence based on exclusion. It generally istaken for granted that there are two types of universities: those that focus on academicexcellence and discovery, and those that focus on access—providing a base level ofhigher education. Institutions that focus on academic excellence generally admit onlythe finest students, most of whom come from privileged socioeconomic backgroundsand have enjoyed undeniable advantages. A ll others are expected to attend lesscompetitive schools. In terms of societal outcomes, this implicit calculation not only isshortsighted, but also may, in the long run, be a fatal error. There is grow ing social andeconomic stratification between those w ith access to a quality higher education andthose w ithout. More and more students who would most benefit from access to thismost obvious avenue of upward mobility—those whom we might categorize as“disadvantaged” or “underrepresented”—are denied access for lack of means orchoose not to pursue for lack of understanding of a high-quality university education.

Higher education is the means by which a skilled workforce is produced andthe source of new know ledge capital and, thus, economic growth and advances insociety, for the benefit of both the individual and the collective. The global economyrequires skilled workers, and the wage gap between those w ith education and skills andthose w ithout continues to w iden. More and more know ledge inputs are increasinglyrequired to perform almost any job in the new global know ledge economy. Theeconomic success of individuals contributes to the success of a society—in fact, it is themain driver.

If we continue to exclude a high proportion of the population from reachingtheir prosperity potential by excessive and sometimes arbitrary “ culling, ” we deprivecountless individuals of opportunities to attain prosperity. We need to make more of aneffort to understand how to educate greater numbers of individuals successfully, but wealso must educate people to be successful. This economic dimension is intrinsic to thesocietal mission of colleges and universities. Individuals deprived of higher educationthrough lack of funds represent not only personal opportunity lost, but also the loss ofsocietal economic prosperity. Individuals deprived of college educations likely w ill earnlower wages and generate fewer jobs than they would have as graduates. A lack of

[ 18 ]


higher education is not only a personal loss; it is a loss for all of society and the global economy.

We reject the conventional w isdom that excellence and access cannot beachieved in a single institution and have committed ourselves to building a universitythat combines the highest levels of academic excellence w ith access to a broaddemographic, and to accomplish this at scale. Such an institution seeks to provide thebest possible education to the broadest possible spectrum of society, embracing theeducational needs of the entire population—not only a select group, and not only theverbally or mathematically gifted. Its success w ill be measured not by whom theuniversity excludes, but rather by whom the university includes, and from this inclusionw ill come the diversity necessary for the advancement of society.

Our mission, as we have conceived it, is to build a comprehensive metropolitanresearch university that is an unparalleled combination of academic excellence andcommitment to its social, economic, cultural, and environmental setting. Excellence,access, and impact are thus integral to our mission and integrated in a single institution.Of the 150 major research institutions in our nation, both public and private, ASU alonehas sought to redefine the notion of egalitarian admissions standards. Our approachhas been to expand the capacity of the institution to meet burgeoning enrollmentdemand, and provide expanded educational opportunities to the many gifted andcreative students who do not conform to a standard academic profile, as well asoffering access to students who demonstrate every potential to succeed but lack thefinancial means to pursue a quality four-year undergraduate education. Our admissionsstandards are determined by our assessment of a potential student’s ability to douniversity-level work, not by test scores or some other arbitrary indicator.

In the rapidly changing and highly competitive global know ledge economy, thevalue of a university education has never been greater. Higher education is the meansby which a skilled workforce is produced, and is the source of economic growth andadvances in our society, for the benefit of both the individual and the collective. Ourcolleges and universities play a key role in ensuring that, as a nation, we w ill continueto lead the world in innovation, maintain our competitive advantage, and weave thefabric of our economic prosperity. W ithout an increasingly highly educated citizenry, weas a nation may face a reduction in our quality of life in the next generation, somethingunheard of in the past. In order for America to remain competitive, it is imperative thatour universities prepare our students to learn rapidly, and make them capable ofintegrating a broad range of disciplines in a rapidly changing world. But the institutional

[ 19 ]


design of our universities may itself represent an inherent obstacle. Ourreconceptualization of ASU has been undertaken to correct a number of inherentdesign flaws in American research universities.

D emographic Challenges to Excellence, Access,and Impact

Arizona State University is at once the youngestand largest and fastest grow ing of all major Americanresearch institutions, enrolling more than 64,000undergraduate, graduate, and professional students intwenty-one colleges of equally high aspiration configuredacross metropolitan Phoenix. ASU is the only comprehensive university in a metropolitanregion w ith a population that already exceeds four million and is projected to mergeinto a megapolitan corridor w ith a population that could approach ten million in thecoming few decades. As one of the fastest-grow ing states in the nation, Arizona w illcontinue to experience large increases in its college-age population but lacks a sufficientfour-year college infrastructure to accommodate that growth. Arizona’s economy isinsufficiently diverse to accommodate its population expansion, and the state has majorchallenges associated w ith its environment, health care, social services, immigration,and the performance of P-12 education. As is the case in California, where minoritiesalready constitute a majority, w ithin the near term, no single demographic category w illcomprise a majority of the population in Arizona. The rapid population growth isaccompanied by rapid cultural diversification, and the unprecedented transformation ofthe regional demographic profile requires ASU to offer access, promote diversity, andmeet the special needs of underserved populations.

At the same time that the greater Phoenix metropolitan region matures andbecomes the heart of a vast megapolitan region, ASU has set a course to evolve from aregional university to a national research institution of top rank. In response todemographic pressures, and because we believe that the university can bestaccommodate the needs of the region by facilitating the broadest possible distributionof its teaching, research, and community service, we plan to increase enrollment fromthe current level of 64,000 students to approximately 100,000 by 2020, thus providingexpanded educational opportunities—both on-campus and online—to qualifiedstudents. To accommodate enrollment increases from 35,000 students in 1975 to100,000 in 2020 is no small feat. In terms of resources and infrastructure, during thepast five years we have added nearly seven million square feet of new academic space,

W ithout an increasinglyhighly educatedcitizenry, we as a nationmay face a reduction in our quality of life in the next generation,something unheard of in the past.

[ 20 ]


including more than one million square feet of new research space. The infrastructurerequired to accommodate such growth requires billions of dollars in capital investmentand, in the past five years, we have invested $1.5 billion in new facilities. There remain$3.5 billion of additional facilities yet to come, and the government w ill finance lessthan one-third of those. Investment has come from private sector partners, donors, andmultiple municipal governments. A master plan is redefining the relationships betweenthe four ASU campuses, the clusters of colleges and schools that comprise eachcampus, the university community and its academic programs, and the university andsurrounding metropolitan region. The intent of the master plan is to create campuseswhose buildings and grounds reflect the scope and stature of a world-class institutionand provide for our students a vibrant living and learning environment. Among themost important planning principles we observe is the integration of the campus into thecommunity, which is consistent w ith our design aspiration of “social embeddedness. ”

Consistent w ith our design aspirations to focus on the individual and transformsociety, ASU proudly champions diversity, and the enrollment of students of color since1996 has increased by 81 percent. And, while the freshman class has increased in sizeby 36 percent during the past five years, enrollment of students of color has increasedby 40 percent, w ith students from Hispanic backgrounds now comprising more than 14 percent of undergraduate enrollment. And, in addition to our Latino students, ASUenrolls roughly 1,500 students from Native American backgrounds, one of the largestsuch enrollments in the nation. In Arizona, our twenty-two Native American tribesspeak different dialects that often are correlated w ith one another, but have nocorrelation w ith either English or Spanish.

Demographic diversification among ASU students is accompanied bydifferentiation in wealth. The average family income of the upper quintile of ourstudents exceeds $200,000 per year. The bottom quintile has a tenfold lower level ofincome, less than $20,000 per year. Our institution thus enrolls students from familiesthat are wealthy, even by American standards, and others from families that havevirtually no income. The current level of investment in undergraduates throughscholarship and gift support is approaching $100 million annually and, for graduatestudents, exceeds $50 million. We have greatly expanded both our investments ingeneral financial aid, and in specific programs designed to help low-income Arizonastudents attend and graduate. The number of students enrolled from families below thepoverty line has risen by roughly 500 percent, a number we expect w ill continue togrow, and we have increased the number of Pell Grant recipients by one-third, from

[ 21 ]


9,200 to 12,300 recipients. A program called ASU Advantage provides tuition, fees,room, board, and books (via merit- and need-based grants and scholarships, and work-study) for students who meet all normal admissions standards and whose familyincomes do not exceed $25,000. And all other students at all income levels pay onlyabout 2 percent of the cost of tuition after merit-based scholarships and need-basedgrants. A lthough we expend university resources for programs like ASU Advantage andreceive no support from the state, we are overcoming financial barriers to access.

As a public metropolitan research university, the profile of the student body,the character of the research enterprise, and the scope of community engagementdiffer from that of other institutions. ASU is a public asset that belongs to all thecitizens of Arizona, and is an active partner w ith the private sector in initiatives toenhance the social well-being, economic competitiveness, cultural depth, and quality oflife of metropolitan Phoenix and statew ide. Consistent w ith our design aspirationsassociated w ith community engagement and societal transformation, ASU offers morethan 1,000 outreach opportunities in partnership w ith more than 500 communityorganizations across Arizona. ASU is investing in the future of the many diversecommunities beyond our campuses.

Institutional Redesign to Facilitate Access to Excellence and Academic Enterprise Arizona State University is mid-point in a decade of unprecedented change and

decisive maturation, positioning itself to emerge as a prominent global university andcomprehensive know ledge enterprise committed to teaching, discovery, creativity, andinnovation. To promote access to excellence despite the challenges of burgeoningenrollment, we have adopted a distributed model, operating from four differentiatedcampuses of equally high aspiration, w ith each campus representing a plannedclustering of related but academically distinct colleges and schools. We term thisempowerment of colleges and schools “school-centrism. ” The school-centric modelproduces a federation of unique colleges, schools, academic departments, andinterdisciplinary institutes and centers (“schools”), and a deliberate and plannedclustering of programs on each campus around a related theme and mission. Predicatedon devolving intellectual and entrepreneurial responsibility to the level of the college orschool, the model calls for each school to compete for status, not w ith other schoolsw ithin the university, but w ith peer schools around the country and around the world.Consistent w ith the design aspiration of academic enterprise, schools are encouraged togrow and prosper to the extent of their individual intellectual and market limits.

[ 22 ]


The reconceptualized school-centric organization has produced a federation oftwenty-one unique interdisciplinary colleges and schools that, together w ithdepartments and research institutes and centers, comprise close-knit but diverseacademic communities that are international in scope. Consistent w ith this school-centric model, we have conceptualized and launched sixteen new interdisciplinaryschools, including the School of G lobal Studies, the School of Human Evolution andSocial Change, the School of Materials, and the School of Earth and Space Exploration.A lthough we are first and foremost committed to educating the students of Arizona,we are equally a cutting-edge discovery organization, focused on contributing toregional economic development through enhanced research and academic programs,including major interdisciplinary research initiatives such as the Biodesign Institute,focused on innovation in health care, energy and the environment, and nationalsecurity; the G lobal Institute of Sustainability (GIOS), incorporating the world’s firstSchool of Sustainability; and the Center for the Study of Religion and Conflict.

Consistent w ith our objective of creating differentiated learning environmentsthat address the needs of individual students, we have designated one of ourcampuses, for example, to emerge as one of the nation’s leading polytechnics, w ithprograms that provide both a theoretical and practical learning experience, preparinggraduates for direct entry into the workforce. We are advancing two differentiatedschools of engineering, one focused on research and the theoretical aspects oftechnology, and the other on practical application. Similarly, we have established threeschools of education and three schools of management or business, each of which isbuilt on a different learning platform. Some are focused on research, some oncultivating leadership skills, and some on practical application through learning-by-doing. We are overlapping and merging these programs to achieve maximum leverage.

At our four campuses, we have instituted a model w ith no campus-levelgovernance—neither chancellors nor provosts, but only deans heading colleges andschools. Deans are responsible for the emergence of individualized learningenvironments. We also have made efforts to eliminate the hierarchization or “ tiering”of campuses. We do not observe a distinction between a “good” campus, a “not-so-good” campus, and a “still-lesser” campus. A lthough not always explicit, that tieringprocess is very common in American universities, and perhaps in some Europeaninstitutions, and it is a pernicious structural obstacle to student success. The historicTempe campus used to be known as the “ Main Campus, ” but now we simply refer to itas Arizona State University at the Tempe campus.

[ 23 ]


To fill out the picture of our organizational reconceptualization to maximizeacademic enterprise, I would like to consider some more complex and even radicalmodes of innovation. The first is an example of what we call “system innovation. ” Thegoal is to have impact on a major social system through innovation in multiple yetinterrelated ways, and the system we are targeting is the P-20 education system. This isa term used in the United States to refer to the whole spectrum of formal education,w ith the “P” standing for pre-kindergarten and the “20” standing for the last year offormal instruction in graduate school. However, I w ill summarize what we are doing asan institution to transform education through the twelfth grade.

First, we are building up our institutional capacity to deal w ith education. Forinstance, we now have not one but three schools of education, each w ith a differentlearning platform for the teachers and prospective teachers who enroll. One school hasa focus on preparing leaders in education, another has a focus on technology andinnovation, and the third is our more traditional school, the highly ranked FultonCollege of Education. At the same time, we are building new collaborative partnershipsw ith entities outside the university. These range from independent, nonprofit groupsconcerned w ith education to public school districts in Arizona. We also are becomingmore active in education policy, working w ith public policy makers in our stategovernment and w ith national organizations.

Finally, we are launching a number of strategic initiatives. One is a nonprofitenterprise called University Public Schools, Inc., through which we w ill operate our ownschools to implement new ideas in education. Our first prototype, an elementaryschool, opened in August 2008. Our schools w ill not be elite schools for the children ofprofessors, by the way. They w ill be for students from all backgrounds, including low-income families and immigrant households where the primary language is not English.We want to demonstrate how education can work for every student. We believe that,when education falls short, the main obstacle is not resource constraint, but, rather,idea constraint. So we are working across multiple dimensions—from redesigning thestructure of our own university to starting actual new schools in the field—in order tocreate an entire system of innovation for transforming this social system.

Fostering an Entrepreneurial University: Toward an Ecology of Innovation To foster the entrepreneurial potential of our institution, ASU also is trying to

innovate more effectively by improving core processes that lead to innovative output.The obvious example here is technology transfer or intellectual property

[ 24 ]


commercialization. A good bit of what we are doing in this area draws on the work ofthe Ew ing Marion Kauffman Foundation, which has studied the issues extensively. AtASU, we are experimenting w ith several new approaches at once. To simplify thelicensing process, for example, we have introduced the use of licensing templates andmaster sponsored research agreements, which can reduce the need to negotiate overterms and conditions. In terms of strategic objectives, we are managing our IP for dealflow density rather than for revenue—in other words, to maximize the number ofinventions and discoveries actually moved into use, instead of trying to maximize near-term income from fewer and bigger deals. We also are experimenting w ith facultyentrepreneurship incentives, allocating the income so as to give faculty inventors agreater incentive for starting companies.

A systems innovation approach is reflected in our institution-w ide campaign,called “University as Entrepreneur. ” The overarching objective of this initiative isperpetual institutional innovation. Toward this end, we seek to inspire and enable bothstudents and faculty members to innovate. In practice, we actually generate newenterprises—whether for-profit startup companies or new ventures in research oreducation, or useful new projects of any kind. As you can see from the chart, creating

UN

IVER

SITY

AS

ENTR

EPRE

NEU

R}SKYSONG

INITIATIVES

DISCIPLINES

ENTREPRENEURS

GLOBAL COMPANIES

ARTS, MEDIA & ENGINEERINGp.a.v.e.

ENTREPRENEUR ADVANTAGE PROJECT

ENTREPRENEURSHIP ANDINNOVATION RESEARCH

EDSON STUDENTINITIATIVE

AZANGELS

TECH VENTURECLINIC

ASUTECHNOPOLIS

AZTE

ARIZONA TECHNOLOGYINVESTOR FORUMDIGITAL MEDIA

HEALTHCARE INNOVATION

INNOVATION SPACEINVEST

SW

LAW

BUSINESS

JOURNALISM

JUSTICE & SOCIAL INQUIRY

THEATRE& FILM

SOCIAL WORKANTHROPOLOGYGEOGRAPHICAL SCIENCES

SCIENCES

ENGINEERING

MUSICNURSING

ARTDESIGN

[ 25 ]


an entrepreneurial university is a multi-level task. We start at the foundation w ith ouracademic disciplines. We want to engage all of them, from the arts and humanities andsocial sciences, to the natural sciences and engineering and the professional schools.Instead of just teaching courses in entrepreneurship that would reach all of thedisciplines, we have decided to embed entrepreneurial opportunities and learningenvironments w ithin each of them. So our nursing college now has an innovation andentrepreneurship center. Our journalism school has a major industry-funded center forinnovation in the news media. In every school and discipline, there is now a set ofdynamic mechanisms for making innovation something that lives habitually w ithin thecontext of the discipline.

At the next level up, we launch and facilitate a series of initiatives geared toassisting entrepreneurial ventures that come out of work in the disciplines. We believethere is value in fostering large numbers of initiatives because, inevitably, some w ill fail.In this manner, we allow natural selection to demonstrate which have merit. One thathas shown particular merit is the Edson Student Initiative. Here we have raised anendowed fund to finance companies started by students. The students own thecompanies and the university expects no return other than seeing the companies takeoff. This is an idea we picked up from Tec de Monterrey in Mexico, and it is workingwell in metropolitan Phoenix: We are incubating about eighty student-led companiesright now. Another initiative that has worked well is ASU Technopolis, which bringstogether entrepreneurs, venture capitalists, and creative thinkers in the Phoenix region.ASU Technopolis encourages innovation and economic development by providingfledgling technology and life sciences entrepreneurs w ith skills and strategies necessaryto convert ideas into commercially viable businesses. Guidance is available for productdevelopment, business infrastructure development, proof-of-concept capital formation,revenue development, and access to funding. Technopolis stimulates economicdevelopment by offering a series of rigorous programs that educate, coach, andnetwork local entrepreneurs. Through this program, approximately 500 early-stagecompanies have received coaching and mentoring, and they have raised about $75million in private investment capital.

The top level in the chart is labeled “SkySong, ” which requires someclarification. It is not uncommon for universities to establish research parks, which beginas entrepreneurial ventures but often turn out to be more about real estate. Wedecided to make our enterprise more than the typical real estate project by expandingthe vision. To position metropolitan Phoenix and the state of Arizona as competitive in

[ 26 ]


the global know ledge economy, ASU conceptualized and designed a hub forknow ledge-driven industries, technology innovation, and commercial activity. Incollaboration w ith the C ity of Scottsdale and the ASU Foundation, ASU establishedSkySong, named for an iconic shade structure that is the signature architectural elementof the complex. We enlisted a public-sector partner and a private-sector partner and,instead of just providing space for locally grown companies, decided also to recruitlarge global and foreign-based companies that could engage in beneficial exchangew ith the university and its startups. SkySong is a $500 million world-class assemblypoint for know ledge and technology research and commerce. W ith 1.5 million squarefeet of densely packed and creative educational, research, cultural, retail, and residentialspace, SkySong w ill be the nucleus for an entire open-ended community ofentrepreneurs dedicated to innovation and learning.

We have instituted a number of institutional policies that promoteentrepreneurship and make it easy to move ideas into action, consistent w ith the policiesmentioned earlier relating to intellectual property commercialization. Conversely, policiesthat discourage entrepreneurial behavior should be minimized. Unfortunately, many

INN

OVA

TIO

NIN

FRA

STRU

CTU

RE

TYPES OF ACTORS

}NETWORKS

SKYSONG

POLICIES

NODES

DISCIPLINES

REGIONAL

FUNCTIONAL

MASTER SPONSORED RESEARCH AGREEMENTS SOCIALLY RESPONSIBLE IP

DEAL FLOW DENSITYLICENSING TEMPLATES

FACULTY ENTREPRENEURSHIP INCENTIVES

ENTREPRENEURS

ASU

INCUBATION

GLOBAL COMPANIES

[ 27 ]


universities have a w ide range of such constraints—the kinds of policies that can inhibitdecision-making, deaden creative thinking, and turn deans into paper-pushers. Changingthe policy structure of the institution is an ongoing project that goes hand in hand w ithchanging institutional culture. There have certainly been individuals who have disagreedw ith the objective of fostering an entrepreneurial university, or who did not see the valuein it, and we have resolved the issue in a number of ways. We have conducted meetingsand discussions to resolve concerns, and, as we advance, we attract new faculty and staffwho are aligned w ith the vision and want to be part of it. In my six years as president, wehave been able to move forward significantly.

Finally—and this is very important—an entrepreneurial university is highlynetworked. It has contacts and working alliances w ith entrepreneurs and industries, andw ith all sorts of individuals and groups concerned w ith innovation and growth. A longw ith cutting-edge research, universities that aspire to have broad impact are marked by a very high degree of connectivity, both internal and external. Such an ecosystem ofnetworked connectivity creates many pathways for people to move ideas from conception to reality. When all of the elements are working together, one perceives awell-rounded innovation infrastructure, and the university becomes part of a largerecology of innovation.

An Investment Model for Academic Enterprises A long w ith organizational redesign comes the need for reconceptualization of

the institutional mindset. Like other public institutions, ASU derives the majority of itsoperating budget from the State of Arizona, which has led it in the past to conceive ofitself as an agency of the state government. But as universities reinvent themselves asacademic enterprises navigating in the competitive academic marketplace, it is imperativethat they assume responsibility for their advancement consistent w ith the paradigm of aninvestment model. W ith the investment model at ASU, we make the case that if eitherthe private sector or the public is w illing to lend us financial or political support, wepromise to work to deliver a specified return on investment. The simple argument forinvestment of taxpayer dollars in a public university proceeds according to the follow inglogic: If the appropriations committee of the state legislature invests specified resources,the university promises to work to deliver an agreed-upon return. W ithout such aninvestment, there can be no return on investment. Here is the negative impact from notmaking that investment. Here is the impact of that non-return on the overall enterprise—the state—that is in your charge. The same argument can be made for investment fromthe federal government, business and industry, and foundations and individuals.

[ 28 ]


When we have made requests for tuition adjustments, we present it as anargument for investment. This past year, we published a sixty-page white paper on thereturn on investment to a family making investments in tuition for their children, orstudents making investment in themselves, and we calculated the annual rate of return tothe individual over his or her lifetime at 12 percent. A college education is the mostsignificant investment that anyone can make over that time frame. When we requested$233 million from the C ity of Phoenix to establish an ASU campus downtown, we madeit on an investment basis. We went to the city w ith our vision of what we want theuniversity to become, and said, “ If you make this investment in us, we w ill be able to starta campus on twenty-two acres of land in downtown Phoenix. Here is what we w illcommit and what our schools w ill be able to achieve w ith these new facilities.” It isdifficult to refute such sound logic.

When one considers the effort required to build this new kind of university, oneperfectly reasonable question that may arise is: How do you pay for it? The answer to thatquestion has several parts. We have had to rethink and make adjustments to our overallfinancial structure, as one would w ith any major program of reconceptualization. In somecases, new initiatives have been launched on an entrepreneurial basis—that is to say, theyreceive initial seed funding, but beyond that they must raise or generate their own funds.But here is the best part: We have found that this model of the entrepreneurial universityattracts investment from others. It is a model that invites w ide-ranging participation andpromises and delivers w ide-ranging benefits. If an institution can put forth anentrepreneurial model of this type, individuals and corporations and foundations andgovernments w ill validate it by investing in the vision.

To summarize a few major investments: The Kauffman Foundation has given us a$5 million grant for our effort, which we leveraged to attract another $25 million inmatching funds. Entities of regional government, w ith whom we had no financialrelationship in the past, have put in significant funding: the $233 million grant from theC ity of Phoenix and a $100 million grant from the city of Scottsdale. Private individualshave invested hundreds of millions of dollars to create endowments for venture funds, forother initiatives, or for particular schools and colleges at the university. A ltogether, inadvancing this model, we have been able to generate about $1.2 billion per year of newresources for the institution in the last six years.

This model puts us in a much better position to compete for major researchfunding because, in addition to basic research capability, we can demonstrate theentrepreneurial capability to move the research forward and develop it for application.

[ 29 ]


This is valuable to sponsors who want to see not only the discovery of new know ledgebut also real-world results. Recently, for example, we have attracted significant investmentfor new approaches to attacking cancer. The government of the Duchy of Luxembourg ispartnering w ith us on a $200 million effort targeted to lung cancer, and we were one ofthree institutions to w in highly competitive grants for new cancer research authorized bythe U.S. Congress. A lso, the U.S. Army has funded a $110 million project to develop athin-film flexible display that would be wearable on the body or disposable like paper.Again, they chose ASU because they believe that our faculty—working w ith the thirteencompanies that we have brought into our facility w ith us—w ill be able not only todetermine the scientific pathway to this technology but also be able to actually develop it.

Toward Entrepreneurial Universities Capable of Perpetual Innovation The very identity of the university is at stake today and each institution must

focus on establishing its own unique and differentiated identity. The question, “ What is auniversity?” is one that every speaker at this conference is in some respect addressing.What are these institutions called universities, and how are they different from otherinstitutions and organizations in our society? And, more to the point, why do universitiesneed to assert their difference from other institutions and insist on their status asenterprises? The greatest universities that exist on the planet have emerged in Americaduring the past several hundred years, and especially during the past century. A ll of theseinstitutions share a set of characteristics that are consistent w ith the great universities thathave emerged in the past. A principal characteristic of great universities is that not one ofthese institutions conceives of itself as either a corporation or an agency, by which I meana standardized unit of government. A ll of them have emerged as enterprises. Some arepublic and owned by collectives such as the State of California or the State of M ichigan.And some are private and self-perpetuated by groups of committed stewards who, overthe course of centuries, have guided their institutions to greatness.

A number of environmental forces are, or should be, influencing how each of usredesigns our universities going forward. Different institutions may succeed by respondingdifferently, but there are some strategies that are almost sure to fail. One is to rely onexisting approaches, trying to advance the university as it has been advanced in the past.Another is the insular approach, simply perpetuating the university as if it is a remotemonastery immune to outside forces. The temptation is great for universities to isolatethemselves in abstractions, perpetuating their institutional cultures w ith their ownsociologies and vocabularies, focused primarily on their own dynamics and their own

[ 30 ]


constraints. It is incumbent on universities as never before to help solve the pressingglobal issues of our time: population growth, climate change, national and internationalsecurity. The scale of know ledge transfer must increase as the demand for newknow ledge increases. It is essential to realize that continued economic growth dependsupon innovation and that the global economy operates according to the forces of“creative destruction,” described by the economist Joseph Schumpeter nearly a centuryago. The only way to move forward is to replace what you have w ith something better—to innovate and to create new technologies and products and processes that replacethose that already exist. We must accelerate the pace of our academic culture to move insync w ith the needs of the world. And the ultimate driver is competition. Theglobalization of American universities is accelerating because of the rise of globalcompetition. G lobalization is the outcome of hundreds of years of connectivity throughtrade and the transfer of know ledge between cultures, and, as the nations of the worldbecome more deeply entrenched in the process of globalization, universities have noalternative but to embrace it.

The industrialized nations peaked some time ago in their capacity to continue toenhance capital creation, both in terms of raw numbers and access to that capital creationprocess by all segments of our society. Several decades ago, the Unites States was theworld’s dominant economic force. But now we face a challenge to our identity becausewe must look toward the future as only one of a number of major economic powers,each interrelated and cooperating w ith others, but, at the same time, competing incompletely new ways. Continued economic growth must remain an overarching objective,because if we stop grow ing economically the social outcomes w ill be dire. If we do notembrace perpetual innovation—and by this I mean innovation in university design itself—not just the products of the university but also our collective standard of living w ill decline,our way of life w ill be threatened, and opportunities for the success of future generationsw ill be diminished. The scale and speed of know ledge transfer is unprecedented, but wemust ask ourselves where the new entrepreneurial institutions are that w ill teach ourstudents how to thrive in this new environment. Where is the next great entrepreneurialuniversity that w ill prepare the next generation for perpetual innovation?

[ 31 ]


Building a G lobal University

by Alan MertenPresident, George Mason University

President of George Mason University since 1996, A lan Merten has championed globaldevelopment throughout his career—often while working across the disciplines of technology, business,and education. After earning a PhD in computer science at the University of W isconsin, he heldpositions at several universities in the United States, Hungary, and France. He has served on manyboards and commissions for governments and industries; in the United States, he was chair of theNational Research Council’s Committee on Workforce Needs in Information Technology, and a memberof the Virginia Governor’s Blue Ribbon Commission on Higher Education. During his presidency atGeorge Mason, the university hosted the inaugural World Congress on Information Technology and hasexpanded its global presence in all fields.

In the summer of 1974, my family and I lived in Budapest . A t the time , I

worked for the United Nations Development Program , teaching

Hungarians how to teach computer science . About two months in to our

stay, our then-two-year-old daughter asked her mother and me to buy her a

cat . We declined , saying that she could get a cat “ when we were home .”

Her response was simple: “ We are home .”

Nearly thirty-five years later, I still smile at that memory, but I also have cometo realize that Melissa was right. We were home. Sally, our son Eric, Melissa, and I wereliving our lives in Budapest and carrying on our business much as we had done in theUnited States. From the perspective of a two-year-old child, there was no difference.

I am fortunate to be the president of an institution of higher learning in theUnited States that boasts more than 30,000 students, offers more than 150 degree

[ 32 ]


programs, has campuses in three locations w ithin the state of Virginia, is establishing afourth campus in the United Arab Emirates and a branch campus in East Asia, and hasreciprocal and exchange agreements w ith sister institutions throughout Asia and otherparts of the world. George Mason University is, indeed, a global university.Consequently, whether I am sitting in my office in Fairfax, Va., or meeting w ith facultyin the UAE, I consider myself to be at home. At all of our locations, we strive to providestudents w ith the best education we can, and help enhance the economic strengths ofour various regions.

I w ish to address today the challenges and merits of becoming what I call the“global university. ” By this I mean a university that is engaged in many or all key areasof the world, and uses a w ide range of technologies and communication channels thatlink individuals, localities, national units, multi-national businesses, and trans-nationalregions. Such a university draws upon faculty, students, and administrators who areknow ledgeable and adaptable enough to embrace this new paradigm, and who arew illing to lead and cooperate at all levels. A global university does not exist in the ivorytower of yesterday. It is an entity w ith ever-grow ing and reciprocal linkages to otherentities of equal influence and growth potential, including corporations, domestic andforeign municipalities, and governments.

At George Mason, we strive to have all these attributes. But, we neitherembarked on the mission nor reached our present stage overnight. Our process hasbeen long and complex. I w ill try to describe it briefly here from several perspectives,including the fundamental steps that universities generally should take if they want tobecome global—as I believe many want to do—and the challenges of implementation.

W hy G o G lobal? To begin, why should a university go global, and why does the world need

such global institutions? I can answer these questions by draw ing on our experience atGeorge Mason.

Our transition to a global institution began in the early 1980s when theuniversity leadership made concerted efforts to think beyond standard academicorganizations. In the early stages, this meant developing cross-disciplinary programs.One graduate program in international commerce, for example, linked culture, politics,management, economics, and law. A ll of the academic disciplines were encouraged tobuild more links across existing boundaries. At the graduate level, this often meantexploring “niche” zones between disciplines for new programs.

[ 33 ]


These efforts helped to open the way for the next stage of the metamorphosis.As we reached across disciplinary lines, we realized that it also was necessary to reachacross national borders. We saw the world becoming more “ flat, ” in the words ofThomas Friedman, and, of course, more competitive. A lso, we recognized that issueswere emerging that go beyond the concerns of any one country or continent. Issues ofthis kind, whether they are economic, environmental, or communicative, are globalchallenges that only can be addressed from a coordinated, cooperative globalperspective. Confronting them adequately would require the combined efforts ofleaders, thinkers, scientists, educators, communicators, and scholars in all disciplinesthroughout the world. In short, we realized that, to become a significant institution ofhigher learning in the twenty-first century, our strengths and vision needed to matchthe needs of the global community. We needed to be active partners rather than simplygood neighbors.

Since the early 1980s, of course, much has been written and said about globalcompetition. Yet even this competition requires greater cooperation if it is to persist as aforce for the good of all. As nations throughout the world strive to advance theireconomies by producing new and increasingly complex goods and services, they needhighly qualified workers who understand global markets. For competition amongnations to be sustained in a healthy way, new trans-national agreements, regulations,and procedures must be established. A ll of the crucial work demands individuals whoare well-educated for it, by colleges and universities.

This dynamic has never been truer than it is today. Universities are at theforefront of major social changes. And, increasingly, when it comes to global change,universities are expected to be at the forefront. We at George Mason feel the urgencyof globalization from our state and federal governments, in terms of their fundingdecisions and the programming they w ish to support. We feel it in our interactions w ithlocal businesses and technology communities. We feel it in the requests from studentsand their families for programs of study that provide understanding of, andcompetencies for dealing w ith, many global issues.

The question is not whether an institution should respond to these signalsfrom its major stakeholders, but how and when.

[ 34 ]


The Path to Becoming G lobalFrom our experience, the primary steps in any transition to a “global

university” need to include:

(1) establishing new priorities that recognize the importance of globalunderstanding;

(2) realigning resources to promote growth in the appropriate places;

(3) providing the intellectual leadership for academic research and scholarshipthat seeks real solutions to global problems;

(4) ensuring that the institution’s global efforts are well-coordinated; and

(5) embracing the wave of globalization so that any individuals or programsthat are not initially part of this movement have opportunities to adapt.When necessary, people must be given opportunities to reinventthemselves so they are not left behind.

Let me cite a few examples of how George Mason has attempted to ride thewave of global education. These are outlined in a forthcoming book by our provost,Peter Stearns.1

Our general education programs now require courses in global understanding.We have geography courses that are taught in Spanish, Arabic, and other languages.We offer education courses to foreign teachers of Chinese and Arabic. We offerelectronically shared sociology courses w ith the Higher Economics School in Moscow.We offer global courses in management, health, and environmental science and policy.Nearly 20 percent of our undergraduates study abroad, and our school of managementhas a very successful study-abroad MBA program.

Other examples include a memo of understanding w ith a university in NorthernNigeria in the area of conflict resolution; a one-two-one agreement w ith Chineseuniversities whereby undergraduates from China come to Mason for two years, thenreturn home for a dual degree; and an intensive two-week visit by communicationstudents to England each January to work w ith public relations professionals and gain abroader understanding of this industry.

These programs and numerous others operate w ithin an environment in which6 percent of our students, or nearly 1,800 young men and women, are from other

1. Stearns, P. (2009). Educating G lobal C itizens in Colleges and Universities: Challenges and Opportunities. Routledge: NY, NY.

[ 35 ]


countries. Collectively, they represent 125 nations. We are one of the most diverseuniversities in the United States. This is, w ithout question, one of our great strengths.The diversity of our students adds an invaluable richness to our classes. W ith theirdifferent histories, life experiences, and know ledge, they bring perspectives thatotherw ise would not be present. In particular, our American-born counterparts,including teachers, are the better for it.

But the transition to a global university is not necessarily an easy one. Itrequires an uncompromising institutional commitment that calls for the buy-in ofeveryone. Assuming this is achieved, other hurdles remain. They range from funding the various initiatives and changes, to administrative realignments, to dealing w ithuncontrollable environments created by international politics and tensions. These arerealities, but they are not insurmountable. George Mason University is less than fortyyears old, yet we have moved to a point where our connectivity is not just w ith ourown region or state, but w ith the world.

I often am asked about the role of the president in such a transition. It is vitalthat the university president set the tone for the institution to accept the mantle of“global. ” The president should be a combination spokesperson, cheerleader, andarchitect. He or she must be active and visible in lending support, so that the staff andfaculty can see high-level commitment to moving the institution in a global direction.Words are important, but they must be complemented by action, as people pay closeattention to what the president actually does and even where the president goes. AtGeorge Mason, for instance, the Office of International Programs and Services has anannual program called International Week, and I always make a point of attending asmany of the events as I can. It also is vital that the president bring together the rightteam of scholars and professionals to implement and facilitate global initiatives. Masonis blessed w ith a strong provost and set of academic deans who play important roles inthis movement.

George Mason University now has made the transition to being a globaluniversity. Yet this shift is not something that can be done and then simply crossed off a to-do list, the way one does a list of errands on a weekend. Maintaining thiscommitment requires as much effort as the initial decision to make it. At the same time,the realities of our ever-shrinking and ever-challenging world demand it. I would defyanyone to name one global challenge that does not have education as part of itssolution. This is why universities must become leaders in helping connect as manyentities throughout the world as possible.

[ 36 ]


United in D iversityI began my talk w ith a story about my daughter. I’d like to close by giving

equal time to my son. In 1983–1984, my family and I lived in Fontainebleau, in France,where I was a visiting professor at INSEAD, the international business school. On theflight back to the United States follow ing our time there, I asked Eric, who was thensixteen, what he had learned during the past year. He thought for a moment and thensaid, “ I learned that two things can be different from each other w ithout one beingbetter than the other. ”

My son, like my daughter, was right. The same holds true for colleges, anduniversities, and countries, and cultures throughout the world. They are different, yetthey share similar challenges, and their people need to be provided w ith guidance andresources to address these challenges. G lobal universities can help do this.

The author w ishes to acknow ledge the follow ing individuals for their assistancew ith this article: Sharon Cullen, executive assistant to the president; John Paden,Robinson Professor of International Studies; Daniel Walsch, press secretary; and M ingWan, Professor of Government and Politics.

[ 37 ]

“Europe and its universities are opening up to the

challenges and opportunitiesof the future. The main

concern is that this process is too rigid, that there is toomuch looking back, and that it is taking too much time.”

–Thomas Andersson

a v i e w f r o m e u r o p e

[ 38 ]


The Futures of Universities in Europe

by Thomas AnderssonPresident, Jönköping University

Thomas Andersson is president of Jönköping University in Sweden and a professor ofeconomics at Jönköping’s International Business School. Previously he was deputy director for science,technology, and industry at the Organisation for Economic Co-operation and Development (OECD), andthe head of the Structural Policy Secretariat in Sweden’s M inistry of Industry and Commerce. Publishedw idely on international economics and industrial organization, he has been a visiting fellow at HarvardUniversity, the Bank of Japan, Hitotsubashi University, and the University of Sao Paulo.

W e all know that universit ies in Europe are subjected to pressures

for change . My purpose here is to outline some major economic

and social trends and to indicate what is required for the

universit ies to cope with them in the years ahead . I will start with a few

words about my own university, which is a relatively independent

institution , and thus has had a good bit of freedom to prepare for the

future that I see coming .

Jönköping University is one of only three universities in Sweden that are notpublic authorities (the Stockholm School of Economics and Chalmers Institute ofTechnology in Göteborg are the others). Because we are not public, we can design ourorganizational structures differently, and I would say that at Jönköping we have a mixof favorable characteristics: the ability to make strategic decisions among the boardmembers, coupled w ith a fairly decentralized organization that places high

[ 39 ]


accountability in the different schools. These schools include engineering, healthsciences, education, and communication, and a young international business schoolthat specializes in business renewal and entrepreneurship.

The ingredients for success in our case, as we see it, are:

• being a “ foundation” university w ith high autonomy;

• having a unique governing structure;

• dedication to specialization—including entrepreneurship; and

• strategic partnerships locally and globally.

As one illustration of the importance we attach to partnerships, we have beenable to enlist about 850 small and medium-size enterprises to serve as mentors for eachof our students in engineering and business. Worldw ide, we have developed 380university partnerships. While admittedly we are not in a position to work closely w iththis large a number, nonetheless our large network has helped serve as a platform forstudent exchange. We also work seriously on research collaborations w ith a smallernumber of the international partners.

We have worked systematically to integrate our Science Park, which is a localhub for business development, w ith activities at our university. In that Science Park, wehave rented space for a “business lab” where our students can tinker w ith ideas forcreating new companies. We find it to be essential that the students also be able tomeet w ith more sophisticated and experienced entrepreneurs, and for that we w ill needboth a proper incubator and a section for growth companies. Currently our studentsare creating about seventy companies per year through the business lab; our mainchallenge is to put better conditions for growth into place.

The few highlights I have just given you imply that Jönköping University isgearing up to form its specific part of a new kind of economy and society. Let’s nowpull back to consider the larger picture.

A Changing EconomyWe all are experiencing a set of massive changes in the world economy. If we

were to look at shares of world GDP between 1980 and the present, we would see therelative decline of Western Europe, a stagnation of the share of the United States, andthe rise of new players such as China and India. But to see how dramatic thesedevelopments really are, let’s take a more long-term perspective and go back to the

[ 40 ]


year zero A .D. Of course, we cannot retrieve actual economic figures for that wholetime span. But just by looking at various estimates based on what is known abouthistory, we can clearly see dramatic changes, as shown in Chart 1.

For a very long time, the dominant economic powers were elsewhere, in Chinaand the far East. Then comes the rise of Europe, and later the United States, over thepast two centuries. In the last few decades, many of the old players are reemerging.C learly, further changes lie ahead.

It also has been shown that economic growth tends to go hand-in-hand w iththe quality of national governance—that is, the more vibrant economies usually arefound in countries that have stable and effective governments, the rule of law, relativelylow corruption, and so forth. But there are changes on this front as well. The nation-state is starting to lose its standing as the pre-eminent unit of governance. We nowhave a movement of responsibility to the super-national level on the one hand, and tothe regional and local levels on the other hand.

Perc

ent

of w

orld

tot

al

0

5

10

15

20

25

30

35

1. Shares of World G DP, 0–2000 A.D.

012

020

028

036

044

052

060

068

076

084

092

010

0010

80

1160

1240

1320

1400

1480

1520

1600

1680

1720

1800

1870

1950

1990

2000

Western Europe

UnitedStates

Japan China India LatinAmerica

Africa MENA

Source: The World Economy, O EC D, 2001

1

23

5

6

7

4

8

[ 41 ]


C learly, these processes are far from complete. At the super-national level, forinstance, certainly the European Union has made major strides. It is revamping theEuropean landscape in many ways. But the multilateral institutions need further work.We still are far from where we would like to be globally, on international trade, climatechange, and other subjects. Nor, despite many efforts, do we have a good multilateralframework for protection of foreign investors. In this area, as in many others, what wehave instead are a plethora of bilateral treaties—China, in particular, has a multitude ofthem. So the old pattern of important conditions being slugged out bilaterally, countryby country, still is going on.

Of course, there are other drivers of change. A big one is the rise of a moreknow ledge-intensive economy, as shown in Chart 2.

In this chart, drawn from the OECD’s (Organisation for Economic Co-operationand Development) sector classifications, it is evident that trade in the “high technology”sector—the most know ledge-intensive sector—has grown tremendously in significance.But important changes also are occurring w ithin sectors, such as in medium- or low-tech industries where firms used to be able to compete on the basis of low cost and

Perc

ent

of w

orld

tot

al

200

190

180

170

160

150

140

130

120

110

100

90

2. O EC D1 Manufacturing Trade2 by Technology Intensity

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

(index 1994=100)

Medium-lowtechnology

Low technology

Totalmanufacturing

Medium-hightechnology

High technology

1. Excluding Luxembourg and Slovak Republic2. Average value of total O EC D exports and imports of goodsSource: O EC D, STAN Indicators D atabase, March 2005

[ 42 ]


standardized production. Even in those industries, it is becoming essential to innovateand to add value through know ledge work. There’s less room for surviving merely bybeing a low-cost producer.

As a result, nations are paying far more attention—bordering on obsession—toresearch and development. The European Union and others now are in a race to matchthe R&D lead of the United States and Japan, in particular. Chart 3 shows who isleading—and who is still lagging—in two measures: total R&D investment as apercentage of GDP, and researchers per capita.

In economies w ith high R&D intensity, the private sector is driving it to a largeextent. Sweden, which ranks high on Chart 3, has less than ten private companies thataccount for around 80 percent of its private-sector R&D. Nevertheless, the public sectoris very important for the innovation system, too, especially in what we used to classifyas basic research and basic science. A country such as Sweden invests heavily inacademic research—more so in proportion to its size than the United States, forinstance. Sweden, Sw itzerland, and some other European countries also score high interms of scientific publications relative to the size of the country.

Res

earc

hers

per

1,0

00 e

mpl

oym

ent

0

2

4

6

8

10

12

3. R&D in the O EC D and Non- O EC D Area, GERD in Million USD, 2003

0 1 2 3 4

Source: O EC D, STI Scoreboard 2005

R&D expenditures in billions of current PPP(1)

GERD as percentage of G DP

21

17 14

India (2000-01)

Russian Federation

China

EU25

Chinese TaipeiSweden

United States

Japan

211

285

114

85

[ 43 ]


But none of these input measures, in and of themselves, really captureinnovation and the economic growth that results from it. Nor do other factors, such asthe traditional measures of human capital by education level.

Education: The New G lobal Growth IndustryIt has long been believed that, if there is one sure driver of economic growth,

it is more investment in education. But that relationship is not as strong any more—or,more accurately, it is not as much of a differentiator as it once was. Many countrieshave invested heavily in basic education. We now see rising literacy rates and risingenrollment in secondary education worldw ide, w ith the traditional powers such as theUnited States and Europe no longer having immense leads in these areas.

In short, there is vigorous competition today in educational attainment. Thereis a great and ongoing expansion around the world of tertiary education and universitysystems worldw ide, as seen in Chart 4.

Chart 4 makes clear that higher education is a massive new growth industry. Injust ten years, the number of students in tertiary education has risen from about eightymillion to about 140 million worldw ide, w ith especially big increases coming in Asia and

0%

50%

40%

60%

70%

80%

90%

100%

4. Expansion in Higher Education and Regional D istribution

1995 2005 1995 2005

20%

10%

30%

0

100

120

150

160

60

40

80

20

Source: Euromonitor (2007)

As a share

32%

28%

10%

20%

10%

42%

25

228168

23%

11%

13%

11%

Million students

60

33

16

19

16

AsiaEurope

Latinamerika O vriga varldenNordamerika

.. ..

[ 44 ]


other emerging market countries. But these numbers alone do not tell the whole story.It is important not to confuse more quantity in education w ith high growth. To a verylarge extent, what matters is quality. What are all these students actually learning? Howare their skills to be applied? And how can we measure the quality of the institutionsengaged in this growth industry?

Chart 5 is drawn from three major global ranking systems for universities. Bythese standards, universities in the United States rank best at the very top of the scale,while European universities become comparable only when we get to the “ top 200” or“ top 500” institutions.

Having said this, how universities respond to the challenges facing them is notreally reflected in rankings. The changes taking place throughout the world of highereducation are, again, multifaceted. Consider these additional facts and developments:

• We now are getting students who perhaps are not as well prepared, or asknow ledgeable overall, as those in the past when we still had a more“elite” system. Yet, at the same time, these students are more demandingand less prepared to accept authority than past generations.

5. University Ranking, Regional D istribution

Source: Times Higher Education; ARW U Shanghai Jiao Tong O ch Webometrics

Top10

Top50

Top200

Top10

Top50

Top200

Top10

Top50

Top200

Top500

Top500

Times Higher Education 2006

Shanghai Jiao TongUniversity 2006

Webometrics 2007

United States AsiaEurope O vriga varlden.. ..

7

39 32

20 54 8

29

22

78

1817

207

69

57

37 87 167 10 42 104 191

52

63

524

211

3258

1383

8 31

[ 45 ]


• We have a lot more nontraditional, working-adult students.

• We have an explosion in online distance education. We also have morestudents choosing to study and live abroad: The OECD countries now havea total of 1.3 million foreign students, 44 percent from Asia, 31 percentfrom Europe.

• Higher education remains publicly funded to a major extent, but privatefunding is on the rise, and universities are internationalizing operations.

• Finally, new entrants are getting into this growth industry. New universitiesand also other kinds of institutions are entering higher education andchallenge the incumbents worldw ide.

Key Factors for the FutureAre European universities positioned to handle all of the changes I’ve outlined?

Rather than answer w ith an assessment of the present situation, let me tell you somefactors that I think w ill be keys for the future.

One major point is that, as we train our students and as we try to be relevantto the future economy, we cannot keep working w ith technologies and industries in theold sense—simply by draw ing on basic science and by educating students to do it.Innovation and entrepreneurship have to be present in afundamental way. And this, in turn, means building anincreased ability to respond to people’s real needs.Innovations need to be pulled by the markets. We needto prepare people for that work, and also allow them toengage in such processes in diverse and flexible ways.

A second point is that technologies andinnovation have grown so immensely complex that nosingle individual, no single organization, can managemore than a particular piece of the puzzle. Thus, specialization is essential, and so iscollaboration—working, learning, and grow ing together w ith others, as we all attemptto do new things in new ways. Further, synergies between complementary assets andskills may be cultivated in a myriad of ways, which can only be developed and learnedfrom gradually.

Third, having the courage to try out radical innovations is essential. Incrementalinnovations and marginal changes no longer are sufficient. And for this to be possible,

Technologies andinnovation have grownso immensely complexthat no single individual,no single organization,can manage more than aparticular piece of thepuzzle.

[ 46 ]


there must be openness to setting up new ventures and experimenting w ith newstructures. The university system must be open-minded itself, and it must foster andeducate people who can take advantage of new opportunities.

Fourth, and finally, it is not enough that universities are capable to change.Governments and public policies must learn how to embrace change as well; for this tohappen, societies and companies and individuals must become more open to diversity.Let me give a couple of brief examples from our attempts to build a moreentrepreneurial economy in Europe.

Seed funding for new ventures is one area where the governments in Europestill are thinking too much along traditional lines—believing that public money couldperhaps be pushed in to fill the “gap” between the public funding of scientific researchand the commercial funding of grow ing companies. But that gap is not about lack ofmoney. It’s about agency issues, information issues, and lack of trust among the

different actors that need to operate together: those w ithmoney, those w ith the ideas, and those who areentrepreneurs. We need more sources of seed funding toplay their role, spanning “ friends and family, ” businessangels, and various forms of venture capital. We need theentire chain of seed and growth to work out. We shouldstrive to create an environment in which complementarypeople can truly get together to generate, and support,fruitful ideas for ventures w ith high growth potential.

The second example has to do w ith the fact thatthe information society is moving into a stage where weneed to do much more to keep up w ith it. The interfacesamong actors, and between us as human beings, and thetechnology, are grow ing so intense and complex that we

have to be able to think and act in new ways.

Information technology is already in our cars, toys, and appliances. We arewearing it and carrying it; it’s in our houses and buildings, and there soon w ill be a timewhen it is literally “ in” us, as well. The question is not whether this is going to happen.The questions are whether we want it to happen, how we want it to happen, and whatpeople w ill be demanding. We need the structures and outlook to be able to deal w ithall this change so that what becomes “essential” technology is not for technology’s

Seed funding for newventures is one areawhere the governmentsin Europe still arethinking too much alongtraditional lines—believing that publicmoney could perhaps bepushed in to fill the“gap” between thepublic funding ofscientific research andthe commercial fundingof growing companies.

[ 47 ]


own sake, but for the sake of people as well as society at large. Issues related to datagovernance and the complex of information security, privacy, and integrity alreadypresent enormous challenges and w ill grow in importance as technology advances. Todeal w ith all these issues, we need more synergistic relationships between governments,the private sector, and academia. That interface should further center on people andhelp achieve that people are moving from ignorance to awareness, from passivity toactivity, and from uncertainty to confidence.

Europe and its universities are opening up to the challenges and opportunitiesof the future. The main concern is that this process is too rigid, that there is too muchlooking back, and that it is taking too much time. We have governments andregulations that hinder adjustments and specialization; we have traditions and vestedinterests that favor standardization and/or fragmentation and which impede newcombinations, diversity, and experimentation. We have career paths for researchers thatremain too standardized and traditional—and there is still an excessive belief, in plentyof corners, that the “big” approaches that worked in the past are the key to the future.Certainly we need big institutions, but we also need more nimble and flexible players togo into new areas and try out new ideas. W ithout greater appreciation for pluralismand diversity, true progress w ill be thwarted.

In conclusion: I believe there is good reason for optimism. Europe and many ofits universities are moving in sound directions. G iven the obstacles we have faced, I amsometimes amazed that so much is being done so well. But much more has to beachieved, in multiple ways. We need to hang in and keep improving. Our potential hasonly begun to be realized.

[ 48 ]


For G erman Universities, a Time of Sweeping Change

by Axel FreimuthRector, University of Cologne

Axel Freimuth has been rector (president) of the University of Cologne since 2005. Previously,he was dean of the Faculty of Mathematics and Natural Sciences. He earned a PhD in physics at theUniversity of Cologne in 1989; then went on to become known as a researcher in superconductivity andother areas of solid state physics. Dr. Freimuth held a professorship at the University of Karlsruhe beforereturning, in 1998, to Cologne, where he continues to head a research group in the University’s Instituteof Physics.

Since our topic is the future of universit ies in Europe , I thought it might

help to start with a look at the Lisbon declaration of the European

University Associa tion , entitled “Europe’s Universit ies Beyond 2010.” A

central theme of this declaration is the diversif ication of Europe’s university

systems. O ther important themes are the autonomy and funding of the

institutions, the promotion of research and innovation , in troduction of the

three-cycle higher education structure across Europe ,1 the

internationalization of higher education , and last , but not least , quality

processes. A ll o f these issues are relevant for Germany’s system of higher

education . Currently, Germany is engaged in the largest re form of that

system since the middle of the last century. My talk will brie fly address some

of the major elements o f this re form effort .

1. A three-cycle system has programs of study leading to bachelor’s, master’s, and doctorate degrees. This has not beenthe standard throughout Europe. Germany has long had a system in which the entry-level degree program at“research-oriented” universities was longer and equivalent to a master’s. The Lisbon declaration was issued in 2005and, as of 2008, Germany was in the process of changing to the three-cycle standard.

[ 49 ]


Diversification is a central objective of reform. In the last decade or so,Germany has opened its universities to a w ider public. At present, about 30 percent ofcollege-age youth attend institutions of higher education, and the goal is to furtherincrease this number. But, as the Lisbon declaration says, “moving from an elite systemto a mass system implies the existence of universities w ith different missions andstrengths. ” It is therefore necessary to have different kinds of study programs andinstitutions that are appropriate for the variety of students’ talents and interests.

To date, however, only a limited amount of curricular diversification has beenaccomplished. A few numbers make this clear. At present, there are about 250 stateinstitutions of higher education. One hundred of those are universities which can awarda doctorate, and which all have more or less the missionof a research-oriented university. A lso, there are aboutone hundred universities of applied science, orpolytechnics, as some call them. They do not awarddoctorates, and provide an education w ith a strongpractical focus. In addition, there are about fifty collegesof arts and music. In contrast to other countries, by farthe most students, almost 70 percent in Germany, attendthe research-oriented universities. Thus, diversificationw ith respect to study programs and institutions is ratherpoor. And there is a further problem as well: Germanycannot afford to support one hundred researchuniversities in a way that they all are able to competeinternationally. In the past, the available government funds were more or less equallydistributed over all one hundred schools. But equal funding works against the goal ofinternational excellence. At present, not one of Germany’s universities is among the toptwenty in the world rankings.

Accordingly, a three-pronged reform effort in Germany is now underway: a conscious effort to achieve more diversification, an increase in resources for highereducation, and the distribution of funds to institutions according to their missions andtheir performance. This strategy should enable some German universities to becomemore internationally competitive w ith respect to both research and teaching. Inaddition, the reform effort should produce institutions that have a stronger focus on other issues, like teaching, lifelong learning, or excellence in some specializedresearch field.

Accordingly, a three-pronged reform effort in G ermany is nowunderway: a consciouseffort to achieve morediversification, anincrease in resources forhigher education, andthe distribution of fundsto institutions accordingto their missions andtheir performance.

[ 50 ]


The Lisbon declaration also accords respect for each of the different missionsof universities, notably both research and teaching. Germany has not yet achieved thisgoal either (nor would I guess that it has been achieved in many other countries,including the United States). In Germany, the reputation of a university is more oftenassociated w ith its research performance. This has to change so that excellent teachingalso w ins recognition. Some private universities in Germany have proven that this ispossible by earning a strong reputation w ith an emphasis on teaching, and publicuniversities must follow. An important requirement is a quality management processthat allows us to measure the success of teaching—a subject to which I w ill returnshortly.

Legislating for AutonomyDiversification does not just happen. It must be brought about deliberately and

w ith some care. But this cannot be done in a highly controlled manner; in fact, givingthe universities more institutional autonomy is a key step,so each one can be freer to develop a unique missionand do what it needs to pursue excellence.

In almost all the states of Germany, the legalstatus of institutions of higher education has changedrecently, or is changing at the moment. For example,North Rhine-Westphalia has had a new university law,regarded as the most innovative in Germany, since January 2007. By this law,universities are no longer state institutions but independent public corporations. Thishas substantially increased our university’s autonomy. For example, at the University ofCologne, we now are responsible for the recruitment, salary, and promotion of ourstaff. We have financial autonomy. We can decide freely on the internal structure of theuniversity, and we can decide in almost all cases on curriculum and research. Myuniversity has made use of our greater autonomy in each of these respects, whichshould help us considerably in our efforts to compete on an international scale.

The Science M inistry in North Rhine-Westphalia still governs some aspects ofuniversity activity. It fixes the total number of students the universities must accept, andof course, it provides public funding. This is accomplished through a process ofnegotiation every few years. Nonetheless, the new legal status accorded Germanuniversities has made them more attractive to non-public partners. In just the past year,for example, I have w itnessed more collaborations w ith industry partners—w ith

D iversification does notjust happen. It must be brought aboutdeliberately and withsome care.

[ 51 ]


companies, w ith the local industrial chambers, and so on. I am confident thesecollaborations w ill lead to more private funding of universities beyond what has alreadyoccurred.

The Role of CompetitionDiversification also is brought about through increased competition between

universities, which the German government also is facilitating. The public fundingformula now includes a performance-based component, which has been increasing overthe last few years. In our state today, for example, the performance-based elementamounts to about 20 percent of the total budget, which is quite a large number if yourecognize that a large portion of the university staff is permanent.

The funding formula specifically takes account of the number of graduates andPhD students, as well as the amount of third-party funding raised by the university, suchas from the German Science Foundation or from programs of the European Union.These added funding parameters strengthen competition, while revealing that not allGerman universities are equally successful or strong. For example, 50 percent of thefunding provided by the German Science Foundation goes to only 25 percent of theuniversities. One-quarter of the total funding goes to universities in just three regions,the regions of Berlin, Munich, and the Rhineland—the latter of which includes theUniversities of Aachen, Bonn, and Cologne. Obviously, auniversity that does not perform well in this competitionfor research money has to develop other concepts andstrategies. Some universities in North Rhine-Westphaliaalready are specializing in certain areas to distinguishthemselves.

Another process that has triggered competitionand the development of internationally strong researchuniversities has been the Excellence Initiative. Under thisinitiative, the German government has offered almost two billion euros for research tothe universities, through a competitive process. Three types of funding are available.One is for graduate schools to build high-level, well-funded doctoral programs. Anotheris for so-called clusters of excellence, in which universities focus on important researchtopics. And, finally, a few universities have been selected as Excellence universities,receiving funds for the overall development of the university w ith an emphasis onresearch.

Through the ExcellenceInitiative the G ermangovernment has offeredalmost two billion Eurosfor research to theuniversities, through acompetitive process.

[ 52 ]


The Excellence Initiative has helped in several ways, in addition to providingmore funds. It identifies which universities are strong in research on an internationalstandard and which are not, and thus it creates strong incentives for a university todevelop a unique research profile. The Initiative also is strengthening Germany’s non-university research institutions, such as the Max Planck Society and the HelmholtzAssociation. These institutions, which focus only on research, have a strong tradition inGermany and mainly are funded by the federal government. The Excellence Initiativehas triggered a new intensity of collaboration, and new forms of collaborations,between universities and these research institutions. To give one example, the Universityof Karlsruhe was chosen as one of the German Excellence universities. The mainconcept underlying the proposal was to merge the University w ith the KarlsruheResearch Center of the Helmholtz Association to form the KIT, the Karlsruhe Institute of

Technology. This institution is now very well funded andhas excellent infrastructure. There are many otherexamples in the clusters of excellence, which often rely onstrong collaboration between universities and otherpartners.

Success in the Excellence Initiative also has turnedout to be important for the national and internationalreputation of a university, and moreover, funding from thisinitiative frequently has triggered additional projects anddevelopments. Let me give you an example from my ownuniversity. We received funding for a cluster of excellencefor research on the biology of aging and aging-associateddiseases. At the same time, the Max Planck Institute for

the Biology of Aging was launched in Cologne. A few months later, the University ofCologne, together w ith the University of Bonn and the Research Center Jülich, receivedfunding for a new Helmholtz Center for Research on Neurodegenerative Diseases w ithan annual budget of about sixty million Euros. The state of North Rhine-Westphalia andthe federal government w ill most probably provide another one hundred million eurosfor infrastructure, buildings, and for funding several new professorships at theUniversity of Cologne. In all, about one-quarter billion euros have been brought to theregion w ithin the last two years or so for research in the field of aging and aging-associated diseases.

Success in theExcellence Initiative also has turned out to be important for the national andinternational reputationof a university, andmoreover, funding from this initiativefrequently has triggered additionalprojects anddevelopments.

[ 53 ]


Resources, Structure, and Q ualityI now turn to the important topic of the overall funding of the university

system in Germany. Until recently, German universities were almost wholly government-funded, and typically did not charge their students tuition. That limited the resourcesavailable to the universities for all purposes, and helps account for the fact thatGermany has lagged other developed countries in spending on research anddevelopment.

But the situation is changing. Some German states, including North Rhine-Westphalia, now are allow ing their universities to charge tuition fees. At my university,these fees amount to one thousand euros a year. Out of the new revenue, we nowhave another twenty million to thirty million euros that can be used for theimprovement of teaching. A lthough understandably controversial, the new policy ofcharging tuition has sparked a long-needed dialogue between students and teachersabout the nature and quality of education. This in itself is helping to improve universityteaching.

An issue as important as funding is the implementation of the three-stagehigher education structure w ithin Germany. A lmost all university programs are beingsw itched to the bachelor’s/master’s system. This is a major challenge to be met w ithinonly a few years. For example, the new system has led the University of Cologne, whichis very large, w ith more than 40,000 students, to implement about eighty newbachelor’s programs in just the last year.2 Each of them was accredited successfully. Asimilar change is in process for teachers’ education.

The Lisbon declaration encourages European universities to ensure theemployability of their graduates and, at our university, we are taking this charge veryseriously. Among other things, we have launched a professional school to coordinate astudy program directly relevant to employability. The professional school offers languagetraining and other general skills for all students, and it operates a career service. We areplanning for about 30 percent of the courses to be offered in collaboration w ithemployers.

In order to monitor the quality and success of teaching, we also have installedan extensive quality management system in the last few years. The central controllingoffice provides key data, such as the number of graduates, the average time to earn the

2. As noted earlier, at the University of Cologne, the only entry-level degree program previously had been theequivalent of a master’s, typically taking the student five years. A lso, the University could not sw itch to the new systemsimply by declaring a lesser amount of work to be worth a bachelor’s degree; other changes had to be made as well.

[ 54 ]


degrees, the failure rate, and so on. Professors and students comment on successes andproblems, and on this basis, negotiations w ith the faculties are made which define thegoals for improvement. Reaching these goals is rewarded by additional funding. Themanagement system is being extended w ith a new IT structure on the campus. It w ill bepossible to add a regular evaluation of all curricula by the students. We next plan toinclude alumni in the evaluation to obtain better information on topics likeemployability.

I have provided only a glimpse of the many important changes now takingplace throughout the German system of higher education, and at our own university. I am convinced that these changes w ill lead to substantial improvement in bothresearch and education. Personally, I find it very challenging, but I can tell you w ithouthesitation, that if there were ever a time to be the president of a German university, it is now.

[ 55 ]


Tertiary Education Institutions in Times of Change:A Systems Approach to Institutional Transformation

by Manuel HeitorSecretary of State for Science, Technology, and Higher Education, Portugal

Manuel Heitor is the Secretary of State for Science, Technology, and Higher Education inPortugal. Previously, he was founding director of the Center for Innovation, Technology, and PolicyResearch at the Instituto Superior Técnico (IST), the Technical University of Lisbon. He has been aprofessor at IST and was its Deputy-President in the period 1993-1998. He is also a Research Fellow ofthe Innovation, Creativity, and Capital (IC2) Institute of the University of Texas at Austin, and is a globallyknown scholar in technology management and public policies on research and innovation. He is co-editor of the book series on “Technology Policy and Innovation,” Purdue University Press.

M anuel Heitor graduated from IST in mechanical engineering and

earned his doctorate at the Imperial College in London . He has

done significant engineering research in combustion and fluid

mechanics, publishing papers and co-editing books on these topics. In 2003,

he coordinated a national exhibition on “Engineering in Portugal in the

20th Century,” which won the Dibner Award of the Socie ty for the History

of Technology. In 2004, he received the Research Excellence Award of the

IA M OT, the International Associa tion of Management of Technology.

This conference is about the future of universities, but in my presentation Ioften w ill use the term tertiary education institutions (TEIs), which also include colleges,technical schools, and other schools beyond the secondary level. They all are important;all are part of society, and many of the issues I w ill discuss apply to them all. Indeed, mycentral theme is the necessity of taking a “systems approach” to the task oftransforming our TEIs.

[ 56 ]


That theme, of course, lies at the heart of this conference. The reason that wein Europe and elsewhere are changing our tertiary education systems so profoundly isto meet the needs of a changing society. We want our TEIs to be in tune w ith the largersystems and forces that surround them. We want these institutions to flourish and beuseful in the new age of global competition, technological change, and know ledge-intensive work.

I w ill raise a number of issues and questions that need to be addressed insystemically changing our TEIs, and wherever I think I have good answers to thequestions, I w ill provide those as well. In many cases I w ill draw on what is being donein Portugal.

In terms of taking a system view, I w ill talk about some important practicalmatters such as building “system linkages” w ith other institutions and actors. But I alsow ill go more deeply, inviting you to think about science itself as a social process, andabout research and education as social processes. We must do so in order to structure

and operate our institutions optimally—and this, too, iswhere the theme of societal trust comes in. If our TEIs areto fulfill their functions in society, they need public supportfor their work and their policies. They need students whosee the real value of tertiary education, and w ill engage init as active participants and trusting colleagues. But theyalso must strengthen their own institutional integrity, findways to become more entrepreneurial, and establish moreand deeper relationships w ith outside parties. In particular,

TEIs should explore linkages w ith public and private research organizations, businessesw ithin their regions, and vocational training institutions.

System effects also can be obstacles. In Europe, most TEIs and their staffs haveseen the need for change for many years, but the way the institutions have beenorganized—both internally, and through their traditional links w ith society and theirincentive structures—have long delayed reforms. The major reforms that now areemerging include needed changes to organizational structure, and I w ill touch on thesematters (such as institutional autonomy) as well.

Framing the D iscussionWe must start by recognizing that scientific progress is a key source of

development, and that tertiary education institutions play a critical role in this process.

TIEs also muststrengthen their owninstitutional integrity,find ways to becomemore entrepreneurial,and establish more anddeeper relationshipswith outside parties.

[ 57 ]


The challenge is then to define, and achieve, the optimum role or roles. For context, Iwould refer you to the work of John Ziman, whose influential books, starting w ithPublic Know ledge: The Social Dimensions of Science, emphasized the nature of scienceas a complex whole. In his last book, Real Science, Ziman reminded us that “science issocial, ” referring to “ the whole network of social and epistemic practices wherescientific beliefs actually emerge and are sustained. ”

The role of TEIs in scientific progress must therefore go beyond producingdiscoveries and inventions. It must include strengthening,and expanding, the social basis for progress in scienceand technology.

TEIs also must strengthen their capacity to makethe critical internal changes for modernizing their systemsof teaching and research w ithin a path of diversity andspecialization, w ithout compromising quality.Furthermore, by strengthening their institutional integritytogether w ith enhancing their external links w ith society,tertiary education institutions can carefully improve theirrelationships w ith economic, social, and political actors,thereby creating “new ” reinforced institutions that have gained societal trust. And thismust be achieved in a way that w ill promote new leadership for our institutions. Inparticular, we must promote an international market of excellence for university leaders,so that we can attract and retain the best researchers to lead our universities.

The entire science-and-technology system of the United States often is takenas the global standard, both in terms of actual scientific achievement and in terms ofhaving the appropriate social culture and institutions in place. Likew ise, w ithin thatlarger system, the U.S. university system is seen as a role model because of its rapidresponsiveness to economic and technical change, and its contribution to the creationof wealth. However, one must emulate w ith care. For instance, analysis has shown thatkey elements in the overall scientific success of the United States are a diversity ofpolicies, increasing “ institutional specialization, ” and a mix of public and privateincentives for science and technology—all of which, along w ith massive pastinvestments, are not easily replicated in societies of smaller scale and differentcomplexity.

More to the point for TEIs, especially those in Europe, care must be taken instriving to emulate the very strong and useful role that American universities play as

The entire science-and-technology system ofthe United States oftenis taken as the globalstandard, both in termsof actual scientificachievement and interms of having theappropriate socialculture and institutionsin place.

[ 58 ]


engines of economic development. There is the perception that very high privatefunding in the United States stimulates a very dynamic academia, w ith more direct linksto the economy and w ith greater impact on economic growth. A lso, the prospect ofgetting funds from private-sector income streams—such as intellectual property rights—is very appealing to European universities faced w ith financial constraints.

Such thinking creates the expectation, in European universities at least, thatlinking research more closely to its application in society w ill translate directly andimmediately to cash flows. In some cases, it may; in some cases, it may not. The realdanger is that this perception can lead to an “ institutional convergence” between whatuniversities do (and are supposed to do) and what firms and other agents do. In earlierwork, I’ve shown that this convergence is a potential threat to the institutional integrityof the university and to the future of scientific research, because of thecommoditization of know ledge.

The issue here is not to “save the university. ” It is to understand—and toassure that someone w ill play—the fundamental and unique role that universities haveplayed in the overall, cumulative system of know ledge generation and diffusion. Itappears that the United States is trying not to let this role be jeopardized. There is agrave danger that European university policy w ill destroy these basic functions, throughmisunderstanding American policies toward university-based research. Not only wouldthat harm the development prospects of Europe, it would be detrimental to the globalproduction of know ledge.

Perhaps the most important American dictum to follow is that of Charles Vest,the former president of MIT. In his recent book, The American Research University—From World War II to the World W ide Web, Charles Vest pointed out “ what is bestabout American higher education:”

“ We create opportunity. That is our mission. That is our business. That is first and foremost what society expects of us. ”

It is in this context, and in this spirit, that I now w ill address some furtherissues in the reform of tertiary education in OECD countries. I w ill focus on fourselected and interrelated sets of issues:

1) funding and equity issues (both for research and for the expansion ofaccess to tertiary education);

2) strengthening know ledge production (including through internationalknow ledge networks);

[ 59 ]


3) improving the substance of learning and teaching; and

4) maintaining institutional integrity while diversifying, and extending, thenature of the institution.

I consider all of these issues central to the TEI’s evolving role in social systemsand know ledge systems. Let us begin w ith the items at the top of the list—whichhappen to address the foundations of the whole effort.

Funding, Equity, and AccessArguably the greatest need in tertiary education worldw ide is to strengthen

the “base of the know ledge pyramid” by opening up access to a university or collegeeducation. In Portugal, our underlying assumption is that “students matter, ” and that the main reason for increased funding of tertiary education is to increaseparticipation rates.

But the needs to modernize funding mechanisms, and to strike a good balancebetween “ institutional” and “ competitive” funding for tertiary education, are leadingtopics of discussion in governments everywhere.

The desire to increase participation is not, of course, the only motive drivingthese discussions. Countries also want their universities to do world-class research andbe globally competitive in recruiting talent. In addition tonew financial mechanisms at the national level, this alsomay require—as recently argued by Paul David and StanMetcalfe—new and increased patterns of competitionand collaboration among funding agencies at aninternational level. In Europe, we certainly need tostrengthen the role of the European Research Counciland foster other transnational funding arrangements.

By and large, the financing of tertiary education (and of science andinnovation) has thus far been done along rather traditional lines, at least in Europe.Governments directly undertake R&D, or they subsidize R&D and innovation eitherdirectly or indirectly, through tax measures. The governments raise—or forego—revenueto pay for this support. Yet the history of science is rich w ith varied means of financingscience and technological innovation. And today, new developments in global capitalmarkets present the opportunity to think about even more financing possibilities. Theseinclude the channeling of resources from global liquidity pools to science and

Countries also wanttheir universities to doworld-class research andbe globally competitivein recruiting talent.

[ 60 ]


technology, and the use of enhanced risk management tools that are just as importantto “ financing” as the channeling of money.

The main questions here are: To what extent can the innovations developed inmodern financial markets be expanded and adapted to finance scientific progress, andto attract more people to tertiary education? What have we learned about experiencesw ith loan systems, venture capital, risk capital, and tax incentives?

Meanwhile, when it comes to financing educational access, most governmentsnow are weighing how to arrive at a good national system that increases the fundsavailable while balancing loans, grants, and a w ide variety of other mechanisms. At a

recent international conference in Lisbon on “ IncreasingAccessibility to Higher Education, ” Nicholas Barr of theLondon School of Economics reminded us that the goal isto provide free education to all students, by guaranteeingthat graduates share the costs. The question is the correctshares to be borne by taxpayers and by graduates, as wellas by other private sources.

In Portugal in the autumn of 2007, weintroduced an innovative system of student loans w ithmutual guarantees underwritten by the State, whichcomplements the system of public grants. About 3,000

loans were contracted in the first six months through the banks, representing a majornew achievement for Portugal and Portuguese families.

Our new student-loan system in Portugal has drawn praise which I w ill quotefrom in some detail—not just because I am proud of what we’ve done, but because thepraise mentions specific qualities that a good system should have.

M ichael Gallagher, the well-known Australian leader in education policy, wroteto me as follows:

“The Portuguese initiative satisfies the key policy criteria:

• It is a horizontally equitable scheme.

• It represents good value for students.

• It is financially sustainable at higher volumes of student take-up.

• It is low risk for government and financial institutions.

• It avoids the need for additional administrative infrastructure. ”

Meanwhile, when itcomes to financingeducational access, mostgovernments now areweighing how to arriveat a good nationalsystem that increasesthe funds available whilebalancing loans, grants,and a wide variety ofother mechanisms.

[ 61 ]


Nick Barr of LSE, in his evaluation of the Portuguese loan system, “applaud[s]the facts that:

• The scheme is universal;

• Supplements existing grants rather than replacing them, hence extendsstudents’ options;

• Has no blanket interest subsidy;

• Has a very innovative mutuality element, which is the key that makes itpossible for the scheme to:

• Make use of private finance. ”

The loan scheme also has academic progress requirements for the students,and incentives for improving grade-point averages.

Strengthening Knowledge Production: Issues and ApproachesHaving discussed some ways to extend the base of the know ledge pyramid, let

me now turn to issues at the top, in research and in graduate education.

In research, a very major issue for universities is the tension between “openscience” and the commercial/proprietary approach toscience. Discussion of this topic alone could fill manypapers, and indeed has. To deal w ith the topic very brieflyhere: It has been confirmed that the progress of scientificknow ledge is a cumulative process, depending in thelong run on the w idespread disclosure of new findings.And thus, I concur w ith Paul David of Stanford University,who, in a recent scholarly essay, concluded that open science is “uniquely well-suited tothe goal of maximizing the rate of growth of the stock of reliable know ledge. ”

Therefore, universities should behave primarily as “open science” institutionsand provide an alternative to the intellectual-property approach. In public policiesrelated to innovation, the main challenge is to keep the proper balance between openscience and commercially oriented R&D based on proprietary information. A keyquestion is: At what level should governments foster cooperative exploratory research?This research now is recognized to be vital for the sustainability of know ledge-driveneconomies, as a counterbalance to the demands of individuals, research units, andprivate firms for incentives to engage in non-cooperative, rivalry know ledge creation.

In research, a very majorissue for universities isthe tension between“open science” and thecommercial/ proprietaryapproach to science.

[ 62 ]


As for graduate education: Graduate schools worldw ide have been developingbeyond their traditional departmental structures, and have been doing so in variousways. Some focus more on building interdisciplinary programs w ithin a singleuniversity—the model prevalent in the United States—while at the other end of thespectrum, some build subject-specific inter-university structures. A major trend here,too, is the internationalization of graduate education and research; we are seeing thedevelopment of global know ledge networks.

The common theme is flexible structures, and a common aim is to createbetter links between research training and research strengths. Other goals includeattracting researchers and graduate students whose interests cross disciplinary lines,and—in the inter-university networks—obtaining the “ critical masses” necessary towork and compete at the highest level in a given field.

Some remaining questions include: How much do we need to rely onstructures beyond traditional departments in order to promote research universities? Aregraduate schools improving the employability of their graduates—that is, are thestudents learning skills that are transferable to the marketplace, outside research andacademia? And how do we address quality assurance in these new graduate schoolstructures?

In Portugal, we have been building our capabilities in both research andgraduate education, through initiatives that include making use of the “ leverage” ofinternationalization. Scientific output in Portugal, measured by internationallyreferenced publications, has increased by 18 percent over the last two years. ThePortuguese government’s “ Commitment to Science” program fosters public and privateinvestment in science and technology, and features a large element of partnerships w ithleading institutions worldw ide.

“Partnerships for the Future” is a program initiated in 2006 and, by September2007, the first doctoral and advanced-studies programs were officially launched,bringing together several Portuguese universities w ith universities such as MIT, CarnegieMellon, and the University of Texas at Austin. Unprecedented in Portugal, theseprograms also have facilitated the creation of thematic science-and-technologynetworks in which a large set of Portuguese institutions are collaborating w ithcompanies and other institutions around the world.

[ 63 ]


Improving the Substance of Learning and TeachingAmong the many goals that have been set for tertiary education institutions in

Europe, I now would like to focus on one that is paramount. We must change thepatterns of teaching and learning, promoting more active work by the students andfostering student-centered education, while finding a better compromise between abroader and “general” education at the entrance of tertiary education and atspecialized education at the post-graduate level.

This goal requires TEIs to better understand how people learn. C learly, learningsystems vary (and should vary) across the disciplines. For instance, some disciplines lendthemselves to a project-based learning approach, while others follow a more intensely“academic ” model. C learly, too, individuals have different learning objectives and learnbest in different ways. Still, there is much to be gained in tertiary education by tappingmore deeply into the current base of know ledge about learning—including what hasbeen learned about learning at the elementary and secondary levels.

One good reference is a 2000 report of the United States’ National ResearchCouncil, titled, “How People Learn: Brain, M ind, Experience and School. ” A long w ithsummarizing theories and findings about human learning, the report discusses howdifferent curricula, pedagogical approaches, and “ learning environments” have beenemerging to meet the needs of diverse student populations. It also discusses vital topicssuch as assessment, and how in-school learning relates to learning outside school.

I would draw your attention especially to the needs in science education. Ouraims in science are both broad and high. We want to increase participation in science,and promote the culture of science, while inspiring andpreparing people to be top-level scientists in a variety of fields. This calls for education that spurs activeengagement w ith, and a deep appreciation of, scientific activity.

New developments in science education (andindeed in all aspects of education reform) have beeninfluenced by the constructivist view of learning,advanced by Jean Piaget and others. As Piaget put it,people are best taught by using “active methods which require that every new truth tobe learned be rediscovered, or at least reconstructed, by the student. ” In other words,people must literally learn by “ constructing” their know ledge, repeatedly. Othersemphasize that skills are augmented by learning to “produce” things—and, therefore,

New developments inscience education (andindeed in all aspects ofeducation reform) havebeen influenced by theconstructivist view oflearning, advanced byJean Piaget and others.

[ 64 ]


education in all fields, at all levels, must consider that learning a new practice requiresmoving through discovery, invention, and production not once, but many times, indifferent contexts and combinations.

To achieve this kind of education, we must learn from new research and alsofoster evidence-based, project, and experimental work. But there are a host of otherneeds as well. We need to reduce drop-out rates in tertiary education, focus ontransferable skills and employability, serve grow ing numbers of non-traditional (older)students, and diversify our programs of study.

The drive for diversification in Portugal has led us to promote a “binarysystem” of tertiary education, w ith polytechnic education concentrating onprofessionally-oriented and vocational training, while university education is furtherconcentrated on postgraduate education. Non-university TEIs are seen in manycountries as closer to the labor market, and the more flexible arm of higher education.But questions then loom, such as: How exactly are we to identify labor-market needsand then provide the necessary skills? Are non-university institutions more regionallyfocused—and thus in a better position to promote local and regional clusters ofinnovation?

Portugal has made progress in tertiary education on many fronts, in accordw ith the Bologna process and other European guidelines. But in Portugal, as elsewhere,there is still much to be done, and many questions remain to be answered in the realmof education.

Preserving Integrity and Autonomy, W hile Building System Linkages and BeingResponsive

How to maintain autonomy and integrity while being part of society is an age-old human dilemma, and it is increasingly faced not only by persons, but by universities.The issues involved are complex; I w ill briefly summarize some main threads of analysisand debate, adding my own observations.

According to many authors, both companies and universities have evolved in a social context, to the point of attaining what these authors call “ institutionalspecialty. ” Thus, whereas companies want to obtain private returns for the know ledgethey generate, universities have traditionally made it public. This specialization, or“division of labor, ” is valuable, because by means of it, know ledge has accumulated ata rapid pace.

[ 65 ]


At the same time, it is also w idely agreed that universities (and other TEIs)should have many linkages w ith industry and society—by which they can exchangeideas, be partners in projects, and be aware of one another’s activities and needs. Oneobvious problem I alluded to earlier is that those who think and act together can tendto start thinking and acting alike, thus leading to a “ convergence” of missions thaterodes the university’s specialized roles in society. Extending the university’s links w ithsociety can also, if excessive, lead to resources being spread too thinly. But more seriousdangers (which are not always so obvious) can arise asTEIs take the path of “privatizing” the ideas they produceand the skills they develop.

Consider the higher-education function ofteaching, which imparts skills that each student can profitfrom in the future. The university may therefore feeljustified in raising the direct price of education tostudents, as a way of increasing its income. Meanwhile,state support of education, which is present in virtually every country, has long beenjustified by the positive externalities that result—the benefits that accrue to all, from theskills acquired by individuals.

But public funding for higher education now is being reduced in manycountries, while tuition fees go up. Tilting the financial model toward a fee-for-service(tuition) basis effectively privatizes teaching and learning. If the trend continues, it couldlead to a reduction in the resources that really are in short supply in know ledge-basedeconomies: the skills to use and interpret ideas.

As for the research function: The great majority of the ideas generated inuniversities are of a public nature. Incentives for the production of these public ideascome from a complex system of reward and prestige w ithin the academic community.The privatizing of research results could thus threaten fundamental aspects of the wayuniversities work and their essential contribution to the accumulation of ideas.

One conclusion I draw is that in order to preserve the institutional integrity ofTEIs, state funding of TEIs should not be reduced. But this measure is not enough. Instriving to be ever more responsive to the needs of their economies and societies, TEIsare building many new linkages, extending the definition of accountability, anddiversifying in many respects. New ways must be found of preserving institutionalintegrity amid all this diffusion and diversification.

The university maytherefore feel justified inraising the direct priceof education tostudents, as a way ofincreasing its income.

[ 66 ]


Fortunately, a highly diversified system allows us to make useful distinctions. In terms of preserving research integrity, for instance: If we analyze the universities’research functions, we find that they actually consist of various sub-functions, whichcan and should be subject to distinct public policies and forms of management. Each of the sub-functions can be described as a different form of “Research and …, ” as follows:

• Research and Development (R&D)—This the most common form. It aimsfor the accumulation (and use) of ideas through convergent processes oflearning and know ledge codification.

• Research and Teaching (R&T)—Here, research functions as a way ofdeveloping teaching materials and enhancing the skills of the teachingstaff. This form also is associated w ith convergent processes of know ledgecodification.

• Research and Learning (R&L)—In this form, the main value of the researchlies not necessarily in the creation of new ideas, but in the development ofthe researchers’ skills and know ledge. Research thus appears here as adivergent function, associated w ith processes of interpretation.

Of course, it is not always easy to separate these different functions. But w iththe foregoing distinctions in hand, a diversified university (or university system) couldmaintain research integrity while responding to the different demands made upon it—for instance, by being “selective” in the performance of R&D and R&T, and“ comprehensive” in R&L. Indeed, R&L should be extended beyond the university topermeate the whole education system as a way of promoting learning skills.

I could go on in much more detail about the challenges of maintaininginstitutional integrity and autonomy for TEIs while moving to more flexible structuresand highly diversified activities. I have studied the issues myself and, of course, haveread much of the literature produced by others. What I have tried to do here is brieflyshow how concepts from the literature can be used to analyze the challenges and thinkabout solutions.

My essential conclusions are these: It is good and necessary for a tertiaryeducation institution to expand its activities and extend its networks. In preservinginstitutional integrity, the key requirement is maintaining the academic character of theinstitution’s basic functions of teaching and research.

[ 67 ]


SummaryReform of tertiary education institutions is accelerating, in Portugal, across

Europe, and elsewhere. Key issues that I touched upon here are: funding, equity, andaccess; strengthening research and graduate education; strengthening teaching andlearning generally; and the implications of institutional integrity as TEIs become moreflexible, diversified, and inter-linked w ith the rest of society.

Becoming flexible, diversified, and interlinked is a much-needed set ofdevelopments for TEIs in Europe. We already are seeing our institutions, and oursocieties, grow more dynamic as a result. Much work remains to be done, and oneneed I have not mentioned is the need for excellent institutional leadership.

As our universities and other TEIs undergo a metamorphosis, they w ill needleaders who can manage ongoing reform, and also can manage the new types ofinstitutions that ours are turning into—ever-evolvingnodes in global networks for the creation andtransmission of know ledge. Specifically, attention hasbeen called to the need for two kinds of mechanisms: aninternational market of excellence for university leaders,and a “ critical path” mechanism for attracting andpreparing our best people to take the lead.

A topic I perhaps haven’t said enough about ispromoting the culture, the learning, and the publicunderstanding of science. This has to be done not only inour institutions of tertiary education, but system-w ide. Anumber of countries already have national scienceinitiatives for this purpose, such as “La Main a la Pate” inFrance and the “Ciência Viva” program in Portugal. Various reports from the EuropeanCommission have noted progress on this front, but point out that there is still a difficultclimate in Europe for promoting the notion of “science for all. ”

But as people do come to know and appreciate science more fully, my hope isthat they also w ill know and appreciate the role of our TEIs more fully, thus reinforcingsocietal trust in these institutions. I look forward to continued progress in re-shapingour institutions for research and higher education in the exciting times that lie ahead.

Attention has beencalled to the need for two kinds ofmechanisms: aninternational market ofexcellence for universityleaders, and a “criticalpath” mechanism forattracting and preparingour best people to take the lead.

[ 68 ]


The Future of the European University:Issues, Entrepreneurship, and Alliances

by Wolfgang HerrmannPresident, Technical University of Munich

Wolfgang Herrmann has been president of the Technical University of Munich (TUM) since1995. Previously, he served as chair professor at both TUM and the Johann Wolfgang Goethe Universityof Frankfurt am Main, and as a professor at the University of Regensburg. His scientific research focuseson organometallic chemistry and molecular catalysis, and his work has produced more than 720 originalpublications in journals such as Journal of the American Chemical Society, Chemical Reviews, andAngewandte Chemie. In 2007, he received the Bayerischer Verdienstorden (Bavarian Order of Merit), thehighest civilian honor awarded by the Free State of Bavaria.

Let me begin by defining a term . When we talk about universit ies, what

do we mean? In our definition at the Technical University of Munich , a

“ university” educates the coming generations by involving them in

scientific research , to learn and to see how scientific progress works and

where it comes from . We believe that an atmosphere of creativity

contributes most e ffectively to scientific progress. And we try very hard to

maintain the Humboldt principle , which means that the university is to

teach and conduct research with the same people at the same time . This has

become difficult , o f course , because when Humboldt1 created his new idea

of the university in 1809, which is now ubiquitous worldwide , there were

approximately 50,000 students in all o f Germany. Now we are talking about

1.5 million university students in Germany alone , plus 700,000 students in

the polytechnics, or Universit ies o f Applied Sciences.

1. W ilhelm von Humboldt, an esteemed scholar, was the Prussian M inister of Education. His brother was the naturalscientist and explorer A lexander von Humboldt.

[ 69 ]


So this task, this Humboldtian task, which I deeply believe is the right approachto higher education, has grown much more difficult. In order to cope, I believe thatuniversities have to become entrepreneurial. They have to take responsibility for theirinstitutions; they have to form their own scientific and educational profiles, and—this isextremely important—they have to select their own students for admission. That hasnot been the case in Germany for many decades. In our state of Bavaria, we havestarted by having initiated the amendment of the Bavarian university law and, in themeantime, we are selecting our students in more than 50 percent of our studyprograms, applying a two-stage selection process. This has been more successful thanwe had expected. Our students nowadays hardly quit their courses before graduating,whereas before, we had failure rates of between 20 percent and 50 percent, dependingon the discipline.

The G lobal ContextBefore I invite you to look at issues for the future of universities in Europe, I

would like to highlight some global developments. First, intellectual capacities now arespread all around the world w ith ever-disappearing barriers. European universitiescompete in a global market w ith universities that directly serve fast-grow ing economiescalling for innovation, like those in China, the far East and India, the up-and-comingM iddle East, and, above all, the United States—which is at the top of the list ofcountries most attractive to scientists and students.

Europe, by contrast, is in a process of phasing out industrialization, shifting itsmanufacturing to relatively low-wage economies elsewhere. The unemployment rateamong university graduates is a major concern in a number of European states. Besides,countries like Germany, England, and France are going through demographic changesthat are simply frightening: grow ing populations of older people whose retirements aresupported by a stable or shrinking work force.

Meanwhile, if we define innovation as the response to market opportunities,through organizational changes and new ways of developing high-value products andservices, then clearly Europe’s universities are lagging behind. One of the mostimportant challenges for the universities is to better translate research into commercialopportunities, especially by networking. The “pull” on the research base by business inEurope has become rather weak, as we can see in the accompanying chart by therelatively low spending on R&D.

[ 70 ]


Overall, in the United States, the spending on higher education from privatesources is seven times higher than in Europe. Of course, differences in cultures play animportant part in explaining this pattern. But there is more to it than that.

The world-renowned universities in the States and elsewhere have some keyadvantages. They operate w ith relatively little bureaucracy. They have multiple sourcesof funding. They accept only the best-qualified candidates, on the staff side as well asamong the students, and they do not tenure every single professor from the first day.Last, but not least, they proactively network through alumni groups, which is veryimportant but missing in many places in Europe. Nevertheless, in Europe we can countmore than 4,000 universities, which have seventeen million students and about 1.5million employees, w ith 435,000 scientists—an enormous potential. However, thesecapacities are not being used to the fullest.

Five Issues for Europe’s UniversitiesThere are a number of reasons why Europe is falling short in the competition

for know ledge and market innovation. I w ill single out five:

1) fragmentation in systems;

2) ignorance of business opportunities and needs;

1. G lobal Competition: R&D -Expenses 2000-2003(In Billion US-%)

(Japan, China, Korea,India, Hong Kong,Singapore, Malaysia)

Q uelle: Human D evelopment Report, 2006

USA EU Asia

305

247

196

[ 71 ]


3) lack of flexibility, especially in terms of university structures;

4) over-regulation, a most severe problem; and

5) serious underfunding.

Fragmentation in systems can be explained from a historical context. Memberstates in the European Union have traditionally valued their universities highly, so theyhave tried to preserve their systems on a national level. Naturally, according to country-specific political structures, various systems and subsystems of higher education nowexist in parallel. In Germany, in addition to the federal framework for universities, wehave the Länder decision-making process. Germany is a federal republic shared by anumber of states, the so-called Länder, having their own parliaments and governments.The Länder have responsibility for their cultural affairs, including universities. Thus, forexample, differently from other countries, decisions relating to the bachelor’s/master’sprogram structure lie in the hands of the Länder government—while implementationhas to be performed by the universities themselves.

Under the Excellence Initiative of the German federal and state governments—an initiative to promote science and research—my university has proposed, and istaking, a number of steps to overcome the fixed structures and subsystems. I don’t havetime to go into details on the new structures we are building, but Chart 2 provides anoverview of some major components that are now in place or underway:

TRANS-DISCIPLINARY

INTER-NATI O NALITY

ENTREPRENEURIAL SPIRIT

! Institute of AdvancedStudy IAS

! TUM Graduate Schools

! Clusters of Excellence

! Central ScientificInstitutions

! Strategic Alliances! UnternehmerTUM! Endowment Fundraising! KontakTUM–Alumni

Network! Business Cooperations

! InternationalO ffice

! G lobal PartnerNetwork

! Munich D ualCareer O ffice

! 24% ForeignStudents

2. Some Examples for the TUM Response

[ 72 ]


Diverse centers and clusters of excellence have been formed, and w ill go onbeing formed. The whole structure is trans-disciplinary and highly networked, w ith amultitude of partners and alliances. W ith all of these stepping stones, we are paving theway to our concept for the future, which we call The Entrepreneurial University.

One problem that the Entrepreneurial University must fix is the prior pattern ofignoring business opportunities and needs. The entrepreneurial age dictates thatuniversities can no longer achieve leading positions if their excellence is cultivated inisolation from the market.

Fortunately, there are promising corrective initiatives underway. More than sixtyEuropean universities, including TUM , have developed technology transfer offices. Thereis also an important initiative at the European level, the European Institute of Innovationand Technology. The EIIT is forming Know ledge and Innovation Communities or KICs,2

which are designed to bring together the best brains and the most successfulcompanies in a world-class environment, but w ith a distinctively European character.The first KICs in the fields of climate change, renewable energy, information, andcommunication technology are planned to be formed in spring 2009, followed by KICsin medical technology and nanotechnology. Our participation is ranked a top priority forthe strategic positioning of our university. And there are many more things we can do:

TUM is a big university w ith more than 420 professors and8,500 staff altogether, so we have a broad scope innatural sciences, engineering, medicine, and life sciences.It is absolutely necessary to bridge these traditional fieldsof research.

In my view, there are four keys to success: goodeducation, excellence in research and innovation, know ingthat education and research cannot be separated fromone another, and providing greater flexibility. Success alsorequires us to form strong alliances, as we do w ith the

research institutions outside the university—the Max Planck Institutes, the HelmholtzAssociation and so forth—to enhance the research power of our university. Becausealongside research—notice that I do not say “aside from” research—our cultural

2. According to the EIIT, these Communities w ill be “partnerships between universities, research organizations,companies, and other innovation stakeholders. … They w ill promote the production, dissemination, and exploitation ofnew know ledge products and best practices … [w ith a goal of] transforming the results of higher education andresearch activities into commercially exploitable innovation. ” KIC member institutions are to be chosen on a competitivebasis by the Governing Board of the EIIT, w ith the KICs having initial contractual lifespans of seven to fifteen years.

There are four keys to success: goodeducation, excellence in research andinnovation, knowing that education andresearch cannot beseparated from oneanother, and providinggreater flexibility.

[ 73 ]


commitment is to educate excellent young people and to do so in a research-mindedway. This double commitment w ill certainly lead to a readjustment of the entireuniversity system in Germany and in Europe, both in the types of universities thatconcentrate more on graduate education supported by research, and in the universitiesthat focus more on a highly qualified bachelor’s education.

I cannot stress enough the importance of addressing our current lack offlexibility, or its flipside, over-regulation. Structural flexibility is instrumental for everysingle university to participate in alliances. Achieving structural flexibility means that wehave to overcome the strict state regulations thatcurrently bind universities not only in Germany butelsewhere in Europe. I am convinced that the university inEurope w ill have a future only if it moves from the statusof an institution controlled in every detail by thegovernment, to become an Entrepreneurial Universitythat takes its own agenda into its own hands. That is thebasis of our corporate concept in the ExcellenceInitiative—and it w ill take more than just “autonomy” torealize success. Many people ask for autonomy every day. Autonomy is simply thefreedom to have your own agenda. Success comes only if you develop the mechanismsto carefully and successfully handle autonomy.

Finally, I come to the issue of under-funding. In my view, this is not the keyhandicap of European universities. There is a lot of money w ithin the European Unionfor raising funds for research. The real problem is that there is too much bureaucracy inthe way funds are handed out. A lthough, of course, I would like more money to comeinto the system, it is more important that the individual institutions in the variouscountries be funded according to their success, not by input measures but by theoutcomes: by the successes of students and alumni, by scientific performance, and so on.

I should note here that universities across Europe are on very different fundinglevels, and they also can be funded in different ways. For example, my university, theTechnical University of Munich, is probably the best-funded university in Germany. Idon’t say this everywhere, especially not to the Bavarian politicians (although some ofthem surely know!). Nevertheless, let’s compare our university to ETH Zurich inSw itzerland, which is one of our competitors, on the basis of public funding perprofessor or per student. When you do so, you w ill find three to three-point-five times

Achieving structuralflexibility means that wehave to overcome thestrict state regulationsthat currently binduniversities not only inG ermany but elsewherein Europe.

[ 74 ]


as much of that public funding at ETH. On the other hand, ETH Zurich has less incomefor research projects from outside, be it from governments or from industry. Ourresearch income is currently about 120 million euros per year, which is quite a lot inrelation to the four hundred million that the Free State of Bavaria has allocated for our university.

The Power of AllianceIn conclusion, major constructive changes are underway in German universities.

As is to be expected, there is some reluctance to change w ithin the universities andamong the faculties. Nevertheless, there are fast-moving developments, which I thinkw ill accelerate if we continue to form strong alliances. For example, we at TUM nowhave alliances w ith the Danish Technical University in Copenhagen, w ith the TechnicalUniversities of Eindhoven and Vienna and others; Imperial College London w ill bejoining us shortly.

If we are able to form such alliances, then I am optimistic for Europe, becausewe have a tremendous strength—the cultural diversity of the old continent. It has notbeen well exploited as an advantage over the past, let’s say, sixty years since World WarII. But I think things are coming along. And we all should be optimistic and worktogether for the future of the European universities, because Europe is our future.

[ 75 ]


Moving from a Managed Economy to an Entrepreneurial Economy:The Challenge for Europe and its Universities

by Jan Willem OosterwijkChairman of the Executive Board at Erasmus University Rotterdam

Jan W illem Oosterw ijk is chairman of the Executive Board at Erasmus University Rotterdam.(This three-person board has the power to administer all matters relating to the university as a whole.)Before being named to the position in 2007, Oosterw ijk had been Secretary-General of the Netherlands’M inistry of Economic Affairs, where he was the national coordinator for the Lisbon strategy. Previouslyhe served as Treasurer-General at the M inistry of Finance. He is also on the Supervisory Board of TheHague University of Professional Education, and the A lumni Board of the University of Groningen. Hetook a degree in General Economics at Groningen University, graduating w ith distinction in 1975.

I’m an economist by profession , so I will deal broadly with the economic

and social environment in which European universit ies, including Dutch

universit ies, now operate , focusing on the emergence of an

entrepreneurial economy. Then I will sketch what consequences this has for

public policy and for universit ies, f inishing with some words about the

Holland Program on Entrepreneurship , HOPE.

I speak from the vantage of my position at Erasmus University Rotterdam,which is participating in HOPE. My university is a relatively young one named after thegreat philosopher and humanist Erasmus, born about 1466 in Rotterdam. The schoolstarted in 1913 as the Netherlands School of Commerce, an initiative of the privatesector in Rotterdam at that time. Now the University has schools of economics andbusiness, medicine, social sciences, law, and many smaller ones.

[ 76 ]


Let me begin by draw ing your attention to the large diversity of students inDutch universities, reflecting the cultural melting pot of our society. Nowadays, 25percent of our students come from non-Dutch cultural backgrounds—they areMoroccan, Iranian, Turkish, and others, often first-generation Dutch w ithout anyexperience in higher education. That reflects the open society we have, and we stronglybelieve that our university can help to play the role of emancipator and integrator ofthese new Dutch communities. By the way, these other cultures often have verydifferent views of entrepreneurial activity. So, in that sense, they are very interesting,because our thinking about economics and society is changing all across the country.

We have come a long way in that thinking, as well as in our policies, in the lastforty years. I have w itnessed much of this during my various tenures in the Dutchgovernment, where I have had roles in both macro-economic policy management andin various micro-economic issues. I w illtry to bring some of that experience tothe subject at hand.

Chart 1 shows the currentunderstanding of what the major driversare in modern economies.

Nobody is against well-being as a policy orientation. That always hasbeen the goal, but our view of how to get there has changed. Now it isthrough growth. It used to be through equal distribution, at least in the Europeancontext and certainly in my country. Growth is driven by competitiveness—now weknow that, too. But we used to think the key was the “makeability” of society,1 a bigthing in the Netherlands in the 1970s.

Competitiveness, in turn, is now thought to be driven by the dynamics ofmarkets: by turbulence, by openness, by low entry barriers. And last, to complete thechain, we now understand that the dynamics of markets depend upon people—especially on entrepreneurs—whereas we used to think the economy was driven by

1. Current Economic Thinking

well-being

competitivepower

dynamics

entrepreneurship

growth

1. Literally, the belief that a society can be made the way we want it to be, through large-scale planning andintervention. A lthough the Netherlands was an early bastion of market capitalism, the “makeability” view gainedcurrency during reconstruction after World War II, and some scholars say it was reinforced by the success of the Dutchin re-making their landscape to keep out the sea: If nature can be engineered on such a large scale, why not theeconomy? In a 2003 lecture titled, “Beyond Makeability, ” Prime M inister Jan Peter Balkenende summed up the shiftaway from this economic policy by saying, “The government does not ‘make,’ it ‘makes possible.’ ”

[ 77 ]


large businesses and policies affecting them. It has taken some time since World War IIfor us to find the connections between entrepreneurship on the one hand and well-being on the other. This, of course, has been typical of Europe. In my view, the UnitedStates was a bit quicker to discover the essential roles of competition andentrepreneurship.

Inside Economics: the Search for the Missing LinkUp to now, entrepreneurship has hardly been considered in the economic

literature explaining growth. In that literature, there is a method called “growthaccounting, ” which involves decomposing growth into its different components. It turnsout that countries’ economic growth cannot be accounted for just by classical reasons,by increases in the supply of capital and labor. There is a remaining component, referredto as total factor productivity (TFP) or multifactor productivity (MFP). Of course, thiscomponent itself can have many components, because many things can make theeconomy more productive. We could go through all of ‘the usual suspects,’ butobviously, technology and innovation play important roles.

For that reason, economists often look at R&D, because there is a strongempirical relationship between productivity and R&D at the country level. One critique,however, is that it is not R&D but innovation that stimulates productivity growth. Inother words, R&D is too much of an input measure; it’s the output of R&D that we areafter. More and more it is thought that the link between the two might beentrepreneurship. Often, it takes a risk-taking person to turn the results of R&D into aproduct and then bring it to market.

Still, the formal empirical evidence of such a link, however plausible, so far hasbeen weak. Entrepreneurship often is missing in studies that look at the long-runrelationships between economic variables and growth or productivity development. Onereason could be the lack of high-quality systematic data on entrepreneurship, and Iknow the Ew ing Marion Kauffman Foundation has been active in trying to provide theworld w ith better indicators.

I’m proud to say that some colleagues from both my old and my new workingenvironments—the M inistry of Economic Affairs and Erasmus University—recently

2. Hugo Erken, Piet Donselaar, and Roy Thurik, “Total Factor Productivity and the Role of Entrepreneurship, ” JenaEconomic Research Papers, #2008–19. Friedrich Schiller University and the Max Planck Institute of Economics: Jena,Germany. To measure entrepreneurship, the authors used business ownership per capita corrected for the level ofeconomic development. Business ownership rates alone can be misleading, because as economies advance, they maytend to have fewer small subsistence enterprises.

[ 78 ]


collaborated on a study that, in fact, shows the influence of entrepreneurship on TFP.2

They used orthodox TFP models w ith data from twenty-five countries over thirty years.Now we think we’ve found at least some evidence that entrepreneurship is a significantdriver of productivity growth. We are starting to have a better economic understandingof entrepreneurship, which can help us as we move away from the managed economyof the past.

G ood-bye to the Managed EconomyThis managed economy prospered throughout most of the last century. It was

a system built around economies of scale. Large organizations like U.S. Steel, Siemens,and Philips used scale economies to leverage the traditional inputs of labor, capital, andland; also, they managed routines for innovation in their laboratories. And universitiesadapted to this managed economy. That is why business schools grew in importance.Their part was to train students to manage the disadvantages of large-scale activities,because when firms grow big, their bigness creates problems in organization, infinance, in marketing, and in other areas—and the universities responded to that.

Then came the ICT revolution, which, together w ith more global competition,put the large Western firms in trouble. They reacted, in part, by cutting productioncosts, by substituting capital for labor, and by moving production to locations w ithlower wages. But also they changed their products. Indeed, they moved towardknow ledge-intensive products, higher up in the value chain, which were more difficultto copy by competitors in low-cost countries. For example, Philips Electronics has beenreinventing itself from a manufacturing firm into what is now called a lifestyle andhealth firm.

In this move from mass production to a more know ledge-intensive focus onindividuals, some of the advantages of large-scale organizations seem to disappear. Theeconomic growth generated by the ICT revolution leads also to more individualistic orwhimsical consumers, for whom small, specialized production is better than large-scalemass production. Further, in this “new ” economy, technological innovation becomesmore uncertain and unmanageable. It doesn’t just live in the routines of largelaboratories. It thrives in more of an open-source environment, in the types of industrialdistricts where entrepreneurs and SMEs come together, and become central to theeconomy.

There is a psychological aspect to this shift, too. A psychologist who looks atyou, an individual, might say that, if your point of orientation in shaping your life is

your resources, you are a manager. Butif your point of orientation is youropportunities, then you are anentrepreneur. The same goes for entireeconomies and societies. As the worldchanges, the orientation has tochange—from managing what we havein the managed economy, to creatingwhat we don’t have in theentrepreneurial economy.3

Chart 2 offers some “buzzwords” that sum up how the world has becomeextremely different from the one of just twenty years or so in the past:

What does it all mean? The economy has changed. Public policy shouldchange. And universities should change. They have to move away from the emphasison training students to take part in a managed economy. They should concentrateinstead not just on R&D and human capital in general, but more and more onentrepreneurship and the small-scale environment. In my view, this is and w ill be likechanging the course of a supertanker.

Changing the CoursePublic policy has been responding. In Europe, of course, the Lisbon strategy

often is mentioned as a good representative of a new policy framework—an open-coordination mechanism, as we call it in Brussels-speak. It’s about free economies tryingto nurture innovative and entrepreneurial behavior. But, while the policy lessons of theLisbon strategy are fine and useful, there is still a w ide gap in many countries betweenwords and deeds.

Modern policy has to be more about getting out of the way, as much aspossible, so that inputs are brought into a favorable position to create whatever isnecessary and conceivable. Know ledge, of course, is an essential input, and the use ofknow ledge is the focus of attention. A ll over the European Union, I have seen mycolleagues try to understand the complex machinery of the production, dissemination,and commercial use of know ledge. But we often forget that the key drivers of

[ 79 ]


2. Emergence of the‘Entrepreneurial’ Economy

‘Managed’economy• Scale• Predictability• Conformity• Obedience• Homogeneity

‘Entrepreneurial’economy• Flexibility• Novelty• Originality• Creativity• Diversity

3. The contradistinction between the managed and the entrepreneurial economy was first brought forward by DavidAudretsch and Roy Thurik in “ What is new about the new economy: sources of growth in the managed andentrepreneurial economies, ” Industrial and Corporate Change, 10(1): 267-315.

[ 80 ]


innovations are competitive markets and entrepreneurship. Both these issues should beat the top of any list of growth strategies in any country of Europe, and they’re notthere yet.

Entrepreneurship policies were neglected in my country for a long time, butthey now are developing and I would say that they now are given top priority. Parts ofthese entrepreneurship policies are aimed at the role of education, including basiceducation—which some say is the most important, in terms of giving young people anearly start and building an entrepreneurial attitude.

Universities must play a critical role in this new environment, of course. Thisw ill not be easy, because our public universities have shielded themselves too much andfor too long from the private sector and the markets. In entrepreneurship education, wewon’t succeed w ithout the involvement of the private sector. We also need more thanmoney. We need the private sector’s involvement in terms of content and in terms ofprocess. I think the United States provides a shining example of how to involve theprivate sector w ithout jeopardizing academic integrity. But there are still many, manylessons for all of us to learn about the best ways of engaging universities to advanceentrepreneurial growth.

‘H OPE’ for the Entrepreneurial Age Let me conclude w ith some words on how we’ve responded to this challenge

at Erasmus University Rotterdam. The M inistry of Economic Affairs tendered a grant ofthree million euros, for a policy idea that was borrowed to a large extent from theKauffman Campuses program of the Kauffman Foundation.4 We applied successfully5

and, moreover, also involved the private sector. A ll in all, it’s an eight million eurosprogram. It’s called the Holland Program on Entrepreneurship, or HOPE.

HOPE is an initiative of my university in close cooperation w ith Delft Universityof Technology and Leyden University. We’re all major institutions in the province ofSouth Holland, the most densely populated and most highly developed part of theNetherlands. Together we have a range and depth of academic programs that I thinkare unmatched in our part of Europe—so it’s a good base for such a program.

4. In this program, selected colleges and universities in the United States are implementing “entrepreneurship acrossthe campus”—teaching, supporting, and practicing entrepreneurship in many disciplines and in many ways; making itan institutional priority.

5. In the application procedure, we obtained the support of the Kauffman Foundation.

[ 81 ]


The HOPE initiative has multiple aims. First, starting w ith new courses inSeptember 2008, entrepreneurship is being incorporated into the academic curricula, toinfuse awareness of entrepreneurship and to develop the skills. In addition, HOPE w illstimulate all research staff to think in terms of commercialization. Both students andstaff w ill work in an interdisciplinary environment, where they can come together w iththeir various backgrounds in a new setting.

Furthermore, ties w ith the entrepreneurial business community w ill bestrengthened. There’s been quite a lot of interest, not only from Rotterdamentrepreneurs, but also from large companies in the Netherlands that want to come onboard and be connected to HOPE. I think that’s a sign that the initiative is filling a gapand, in a way, it is long overdue. We should have done this five or ten years ago, butwe’re doing it now. Finally, we expect all of this to contribute to the development ofthe province of South Holland, and because the program w ill attract outstandingforeign students, HOPE has a global dimension as well.

If we look at the academic design of HOPE, we find some underlyingprinciples. The idea is to createthe optimal synergy among avariety of activities, all of whichare necessary for true progressto be made:

As Chart 3 illustrates,HOPE envisions a three-layeredapproach that we call theresearch-teaching-experiencecycle. Research onentrepreneurship w ill feed theeducational program, which w illconsist of both teaching andexperience activities. At ErasmusUniversity Rotterdam, wealready have a long andcelebrated tradition ofentrepreneurship research, sonow we are adding the next

3. Holland Program on Entrepreneurship: H OPE

Three layered approach:research-teaching-experience cycle

Teaching and experience activities applied at four levels:

RAISIN GAWARENESS

G AININ GEXPERIEN CE

BUILDIN G C O MPETEN CE

ENTREPRENEURIALACTI O N

OPPORTU NITYREC O G NITI O N

ENTREPRENEURIALC O M MITMENT

CREDIBILITY

[ 82 ]


steps. Those next steps, the teaching and experience activities, w ill be applied at fourlevels, as you see in the picture.

We start by raising the students’ awareness, w ith our lecturers teaching theeconomic role of entrepreneurship and the basic concepts. The students gainexperience and build competence through mastery of the topics, and the ultimate aim,of course, is taking entrepreneurial action. A long the way, they progress fromopportunity recognition to commitment to gaining the credibility required to take action.

That’s HOPE, and we hope—no, we are certain—that it is going to be a greatsuccess. I have told you a lot here but my main messages are simple. Institutions ofhigher education can and must play an essential role in the changeover to anentrepreneurial economy. We at Erasmus University Rotterdam took up that challenge,and we are answering it w ith this initiative called HOPE. As the program gets underway, we look forward to cooperating w ith you and sharing our experiences in the upcoming years.

[ 83 ]

“Government policy in Israelin the realm of R&D also has

helped to make theuniversities entrepreneurial,

since it has encouragedcollaboration betweenacademic and applied

research.”

–Manuel Trajtenberg

a v i e w f r o m i s r a e l

[ 84 ]


Entrepreneurial Universities:the View from Israel

by Manuel TrajtenbergHead of the Israeli National Economic Council and

chief economic advisor to the Prime Minister

Manuel Trajtenberg is the (first) Head of the Israeli National Economic Council and chiefeconomic advisor to the Prime M inister. A professor of economics at Tel Aviv University since 1984, he isknown internationally for his research on the economics of innovation—in areas from R&D, patents, andgovernment policy to the diffusion and market dynamics of innovation. Professor Trajtenberg is aresearch associate of the U.S. National Bureau of Economic Research, and of the Centre for EconomicPolicy Research in London. W ithin Israel, he has headed major study programs related to science,technology, and higher education. He earned his bachelor’s and master’s degrees at Hebrew Universityof Jerusalem and his PhD in economics at Harvard University.

Ihave been asked to talk about the entrepreneurial universit ies in Israel.

But what I’d really like to do is discuss insights and lessons that can be

applied anywhere . So , among other things, I want to look at what it

means to be an entrepreneurial university, and then what it takes to be

entrepreneurial in the fullest sense .

Israel itself is a highly entrepreneurial society, and so is its economy. First of all,we invest more than any other country in R&D as a percent of GDP, 4.6 percent.Counting defense R&D, which is believed to be another one percent of GDP, altogetherabout 5.6 percent of GDP goes into research and development. Last year, technologycompanies in Israel raised $1.75 billion in venture capital investment, and there arecurrently about seventy Israeli companies listed on the NASDAQ . For a country of only7.2 million people, these are big numbers.

[ 85 ]


And there is more. Many innovations that all of you know about have comefrom Israel. Maybe your laptop computer has the Centrino w ireless platform; the chipsand other components for that have been designed at Intel’s Israel Development Centerin Haifa. ICQ , the first instant messaging software for the Internet, came from an Israelicompany called M irabilis. This company was bought by AOL and the software is stillused w idely, maybe by your children. I could go on, but the point is, by many indicators,Israel is a very entrepreneurial society.

Israel’s universities are one reason for this state of affairs. They are part of asystem that includes government policy, industry, and society at large. Let’s keep thatwhole system in mind as we pose a basic question: What do we mean byentrepreneurial universities?

There are at least three answers to the question.

• One way universities may be “entrepreneurial” is that they are innovativein terms of how they organize and run themselves as institutions. You canbe very conservative in that respect, very attached to your roots; or youcan spread your institutional w ings and fly.

• A second way to be “entrepreneurial” is for universities to serve asengines of entrepreneurship in the broader economy—by generatingideas, by nurturing entrepreneurs, by working w ith industry.

• The third definition of “entrepreneurial” universities refers to their beingagents of change in society at large. They can do this not only byproducing startups and spinoffs, but in a w ider way—or, here again, theycan resist change, and be bastions of conservatism.

In short, when we talk about entrepreneurial universities, we may mean thatthey’re being entrepreneurial in any one or more of these three modes. But here is akey point I’d like to make: It is very hard to be entrepreneurial in just one of thesemodes. For example, it is difficult to be an economic generator of spinoffs and newideas while being very conservative on the institutional side, and vice versa. You need toaddress all of the aspects of being entrepreneurial.

I am urging this broad view because, in public discussions of theentrepreneurial university, there is too much emphasis on the TTOs (technology transferoffices). Universities create these offices, and then compare notes on how manyspinoffs they’ve generated and how many royalties they’ve collected, and the object isto be able to say: “ M ine is bigger than yours. ” That’s the sort of a beauty contest we

[ 86 ]


often see—and it only addresses one part of one aspect of the issue, which is notnecessarily the most important part.

This leads me to a subject that often is overlooked. Universities essentially havetwo key missions: One is to create new know ledge, and the other is to preserve andtransmit existing know ledge. Of course, the missions are interconnected, but they’renot the same. And know ledge can be lost: It can be destroyed; it can be forgotten. Ifyou want a superb science-fiction rendition of know ledge loss, recall Isaac Azimov'sseminal “ Foundation” series, which brings home w ith great poignancy what could bethe dire consequences of such loss. The humanities are not going to generate manystartups or IPOs, but know ledge in the humanities is being lost in every society as wespeak and we have to address that. Even know ledge in the physical sciences can belost, in spite of having progress at the same time. So, while we are busy creating newknow ledge by pushing the frontiers and asking new research questions, at the sametime we must have the mechanisms to preserve and cultivate know ledge that is alreadyhere. And for that, we need a diversity of institutions w ith different comparativeadvantages and facilities.

But before I go further, I want to sound a cautionary note on the topic ofknow ledge creation. In my view, there are probably too many institutions w ith toomany people “pretending” to be engaged in know ledge creation or, rather, in writingan ever-grow ing number of papers. Publishing that many papers requires new outlets,so we create yet more journals until we don’t have room in the library, but then enterthe Internet, which supposedly has room for everything. Is all that, or even most of it,really adding to scientific know ledge in any meaningful way?

We are creating congestion in the pipelines of know ledge, and this hasbecome a liability. It gets in the way of true scientific advance. We have to becomemore selective about true know ledge creation. In fact, we need to devise a system ofincentives that w ill promote self-selection and specialization, so that those w ith acomparative advantage in know ledge creation w ill not be crowded out by those w ith acomparative advantage in know ledge preservation and transmission (including, but notlimited to, teaching), and vice versa.

Otherw ise, everybody in academia jumps into the game of publishing articlesand congesting the system. It’s not an easy game to get away from, because everyuniversity president, justly so, wants to be “on top”—which, at present, means beingon top in a single dimension: research. Diversity is a nice slogan, but in a one-dimensional system, there is no diversity. Ranking is not diversity. Universities need to

[ 87 ]


operate in a multidimensional space. We need to define that space, and then fill thespace by defining the incentives that w ill allow diversity to develop and flourish.

Israel’s Universities (and what made them entrepreneurial)Now let’s look at the universities in Israel, which I think you w ill find

entrepreneurial in various dimensions.

Start w ith the first sense we referred to above, namely being innovative asinstitutions. In Israel, we have six research universities plus one big research institution,the Weitzman Institute of Science, which also trains PhDs. My university, Tel AvivUniversity, is the largest, w ith about 27,000 students. And, like the others, it has grownnot just by adding students and faculty, but by expanding the mission and the scope ofstudies—often, into multidisciplinary, promising new areas. Israel also has more thanfifty colleges that grant bachelor’s degrees and, in some cases, master’s. Many of thesecolleges have been founded in the past fifteen years, so we’ve literally had a wave of“academic startups” that still are evolving, and this, too, is institutional innovation.

As for being engines of innovation and entrepreneurship for the economy—there is plenty of evidence that our universities have done well. The Technion islegendary for producing scientific breakthroughs and startups; the Weitzman Institute issecond only to MIT in terms of revenues from patent licenses, and the HebrewUniversity is not far behind.

If you want to measure scientific output by papers published, Israel for yearshas been one of the three leading countries (along w ith Sw itzerland and Sweden) interms of scientific publications per capita. We also are near the top on measures ofhuman-capital input, such as the number of scientists and engineers per capita, anduniversity degrees per capita. So there’s excellent scientific performance and we’redoing especially well in fields such as computer sciences, math,and chemistry.

The question we have to ask next is: What are the characteristics of Israel’suniversities that have enabled this success, in a country that has no lack of pressingconcerns? A key factor has been a set of institutional mechanisms that were put inplace early on—and I keep thinking that some of this was just luck. You know,sometimes you do something in public policy or institutional design that turns out to beright and then claim, “ Oh, I thought about that. ” I’m not sure if that was the casehere, but it’s true that these mechanisms have worked well.

[ 88 ]


One such institution is what I’d call a buffer mechanism. Israel’s universities arepublic in the sense that they’re publicly funded—but there is a buffer between thegovernment and the universities. There is a central funding and planning authority thatreceives the funds for higher education from the government in a lump sum, thendistributes the funds on its own to the universities. This authority is controlled by theuniversities. It is supervised by the government, but not managed by it. Of course, therealways are debates about how much the government can and should intervene, butthis is one mechanism designed long ago that confers a great deal of autonomy topublicly funded universities.

Another key mechanism has been the universities’ policies on intellectualproperty. For years, the universities in Israel have had huge numbers of patents, andvirtually from the beginning—almost by default, as it were—they practiced a de factopolicy of no-policy. Many of those patents were simply put into commercial use by thefaculty scientists themselves, w ithout negotiating w ith the universities. More recently,the universities have tried to impose a structure on the process, w ith the creation ofTTOs and other measures. But the notion of allow ing the scientists to benefit from the

IP was there long before that, and it has created a systemfull of entrepreneurially minded faculty members. Perhapsuniversities in other countries can learn from ourexperience in this regard.

The final important mechanism is a close linkageto the U.S. university system. We conduct so muchcollaboration and exchange that you could almost say thatIsrael’s universities function as an extension of the U.S.

system. This, too, was neither an intentional development nor an expected one. Manyof the founders of Israel’s universities came from Europe and had a Europeanorientation. The Technion, for instance, was established by professors from Germany.But somehow, the whole situation has evolved into one of close connection w ithuniversities in the United States. We work w ith them, we emulate their modusoperandi, and we evaluate faculty by their standards: When any faculty member ispromoted, we do that on the basis of her standing in the U.S.-based scientificcommunity, not that of Israel. And, since American universities are the best in theworld, this connection has been of great, lasting advantage.

Government policy in Israel in the realm of R&D also has helped to make theuniversities entrepreneurial, since it has encouraged collaboration between academic

We conduct so muchcollaboration andexchange that you couldalmost say that Israel’suniversities function asan extension of the U.S.system.

[ 89 ]


and applied research. For example, in the early 1990s the government began a programcalled “ MAGNET, ” which supports consortia from industry and academia to performpre-competitive research in some area of special interest and promise. The roster ofMAGNET consortia keeps changing and there are currently about a dozen of them, infields from cell therapy to next-generation w ireless. They’ve become very important interms of breeding collaboration, know ledge exchange, and the entrepreneurial spirit.

During this same period, we also started an incubator program for “zero-stage” startups, responding to the opportunity presented by the huge influx ofimmigrants from Russia follow ing the collapse of the Soviet Union. Many of them werescientists w ith tremendous know ledge and ideas, but no experience w ith taking ideasto market. So the incubators, along w ith the other mechanisms and policies I’vedescribed, have helped to bring these people into an entrepreneurial environment.

To return once more to how the universities themselves have beenentrepreneurial: They have reacted quickly to the emergence of high-tech industry inIsrael. They have done this in many ways: by collaborating w ith companies in Israel, andw ith outside companies locating operations in Israel. By educating more graduates whogo into the high-tech sector, and by allow ing professors to go back and forth betweenthe universities and industry—their policies are quite liberal in that respect. A ll of thisproduces an interchange that is very fruitful for all concerned.

Now, is everything fine w ith this entrepreneurial university system? By nomeans. I was a member of a government commission formed recently to examine thehigher education system, the proximate reason being that we have been facing aserious budget crunch (prompted in part by the rapid growth in the number ofstudents), but more importantly because of deeper structural problems that have beenlurking the background. For one thing, the universities are not flexible enough in termsof salaries. The faculty unions negotiate nationw ide agreements that set the pay scales,and we need to work on that aspect. A lso, one of our advantages is that we playedglobally before globalization was in fashion, but globalization cuts both ways. A lot ofour best students now become faculty in the United States, and we are losing in thegame because we don’t have the flexibility to counteract the market forces.

As for student tuition, our tuition fees are now about $2,500 per year. Wewant to raise them, and at the same time provide long-term loans that are easily re-payable. We think this is necessary to fund higher education in the future and,personally, I think it’s also the best thing to do socially. About 50 percent of each cohortdoes not go into the higher education system—and yet, currently they are subsidizing

[ 90 ]


those who w ill probably go on to do better financially than they do, because of theexpected value of a university degree. I think that’s inequitable. And there are furtherissues such as the right division of labor between research universities and teachingcolleges, the role of competitive funding versus funding according to number ofstudents, etc.

The point is that, even if Israeli universities traditionally have been quiteentrepreneurial, we cannot take anything for granted: In such a dynamic globalenvironment, there is need for constant change, revision of received dogma, andrethinking of institutional design. Indeed, I believe this also is true for universitiesthroughout the world.

The Capacity for ChangeIn thinking about change, it is important to keep in mind a notion put forth by

Nathan Rosenberg, the prominent economic historian from Stanford. He suggests thatgood universities are those that managed to evolve into “endogenous” institutions. Thisessentially means that they rapidly adapt as the environment changes and, indeed, theybecome an integral part of the change. Here is a classic example:

One of the distinctive features of MIT and Stanford is that they have beenextremely fast in bringing into the university new fields that developed elsewhere, suchas solid-state physics in the early 1950s. Soon after the invention of the transistor, MITand Stanford brought in experts to teach and jump-start the emerging field of solid-state physics—even if they didn’t have traditionally sanctioned academic credentials.These institutions were flexible and foresighted enough to bring them as adjuncts, yearsbefore any other universities anywhere in the world even started to grasp the potentialimportance of this fledging scientific field, which would be destined to have such adramatic impact for decades to come.

There were similar “early responders” in chemical engineering at the start ofthe twentieth century, and later on in aeronautics. Some universities moved into thesefields when they were not yet recognized by the academic community as legitimatefields of study, not quite certified as the real stuff. And ten years down the road, thatnot-quite-real stuff turned into the main thing. So the ability to recognize what’s goingon out there, and to bring it in even if doesn’t quite fit w ithin the well-established rulesof behavior of the university—that’s a key trait.

Speaking of behavior, as I noted earlier, one role of entrepreneurial universitiesis to be agents of change in the society generally. And one way universities can do that

[ 91 ]


is through their often-overlooked function as socializing institutions. They takeyoungsters eighteen or nineteen years old, who, of course, come in w ith their ownvalues and desires, but who are still quite malleable and susceptible to change duringthe years they spend at the university. How you treat them is extremely important—what sorts of incentives and challenges you present to them, what sorts of outcomesyou lead them to expect down the road in life. If you pamper them, if you give them allA’s, if you give the feeling that, no matter what, they’re going to get the degree, sothey ought to relax and enjoy the ride—well, it is rather unlikely that they w ill becomeentrepreneurs. Socialization is something we don’t pay enough attention to. We are tooinstrumental in our perceptions. We think mainly about universities producing papersthat w ill get citations, and that, in turn, w ill generate more funding, rather than lookinginto the w ider economic and social context.

Another crucial issue that needs more attention from universities is how wecan “build in” the ability to change our own behavior as institutions. One of the basicpredicaments in the evolution of societies and economies is that, whereas technologytypically changes very quickly, institutions tend to move slow ly: They have institutionalinertia. Thus, from time to time, any society can suffer from a disjunction between thenature of its institutions and what has evolved around them. The most successfulsocieties are those w ith built-in capabilities for institutional change. Think aboutdemocracy: The reason democracy has spread is notbecause it’s nice to people. That has never been acriterion for success in history. Democracy has prevailedbecause, essentially, it’s a mechanism for endogenouschange, for non-traumatic adaptation, for preventinginertia.

And just as the capability for change is presentin the political arena, it needs to be made present in therealms of science and higher education by creatingmechanisms for continuous change. Others at thisconference have described recent changes in the German university system, which has ahighly distinguished track record, but that seemed to have been locked for too longinto institutional inertia. But what I’m saying to all of you is: Don’t look only at thechanges you need to make today. Think about the changes that w ill need to come inthe future, because no matter how well you design your institutions, what you decidetoday is not going to be good in ten or fifteen years. Therefore, the real question is, dowe know how to institutionalize change?

O ne of the basicpredicaments in theevolution of societiesand economies is that,whereas technologytypically changes veryquickly, institutions tendto move slowly: Theyhave institutional inertia.

[ 92 ]


The Challenges Ahead

I w ill close by pulling back to a global view. There are now four trendsoperating worldw ide that are changing the fate of our societies. They place immensedemands on our abilities to change and respond.

• One trend is the shift from West to East. When you look at the rates ofgrowth in China, India, and other nations, it’s clear that the center ofgravity of the world economy is moving east, and nothing is going to stopit. So, for us at universities in the rest of the world, the question is, whatdo we do about this shift? How do we connect to it?

• The second trend is climate change. This is not the first time humanity hasaffected nature, but two things are different now. One is the scale and theother is the recognition that nature also is endogenous, meaning that wecan affect it both ways—for better and for worse. And, again, what weare going to do about that as universities?

• The third trend is the rise in commodity prices, which is not just a short-term issue. When we have a world grow ing as a whole to an incredibleextent, the pressure on resources is bound to lead to much highercommodity prices. The only answer is science and technology that canproduce substitutes for the rising commodities. We want Malthus to keepturning over in his grave as we prove him wrong again and again. He hasbeen wrong every time in the past, and he w ill be wrong this time aswell—but we have to make it happen, and the universities have to play abig role.

• The last trend is aging, which also creates a completely different world forhumanity. It raises a host of challenges that I won’t expand on, except tosay that universities w ill be involved.

Lastly, let me touch on the issue of managing change. Here at this conferencewe have many presidents of universities and other scientific institutions, and I keepwondering: What has prepared you for the job? When you manage a big corporation,you go through preparation in management—you go to business school, you rise in theranks of managing, you have mentors along the way, and so forth. I’m not saying thatthis is the ideal. We have to recognize that, in academia, there’s a problem w ithmanaging universities. Our academic leaders rise to the top by their scientific

[ 93 ]


achievements first and foremost, not necessarily by their managerial skills. Somethinghas to be done to help cultivate those skills.

Somebody at this conference said that these are exciting times to be thepresident of a university. To me, these are exciting times, period. The trends I justdescribed are trends that happen not w ith a frequency of years, and not of decades,but of centuries. To be alive at this time, to be able to try to influence where the worldis going, is a great privilege of our generation and we should be using it w isely.

[ 94 ]

a d d i t i o n a l p a p e r s

“Procrastination and inactionare the most dangerouscourses for colleges and

universities in this time oftechnological evolution.

Dispassionate contemplationof the what-ifs and carefulexamination of our often-

unstated assumptions are thebest preparation for

preserving—and, better yet,expanding—the critical roles

that universities play in our society.”

–William Wulf

[ 95 ]


University Alert:The Information Railroad is Coming

by William WulfUniversity Professor and the AT&T Professor of Computer Science

University of Virginia

W illiam Wulf is a university professor and the AT&T Professor of Computer Science at theUniversity of Virginia. From 1997–2007, he also was president of the National Academy of Engineeringof the United States. Earlier in his career, he was a professor at Carnegie Mellon University, and thefounder and CEO of a software firm, Tartan Laboratories. In 1968, Wulf earned the first PhD incomputer science ever awarded at the University of Virginia. His research interests revolve around thehardware/software interface and, thus, span programming systems and computer architecture. Forinstance, he designed Bliss, a systems-implementation language, and was one of the architects of theDEC PDP-11 minicomputer.

To think about the future of universit ies, we need to think about

information technology, and not only in terms o f what it might help

us to do . We need to think about how it might change what we do .

My purpose today is to stimulate that kind of thinking. What I w ill say here isdrawn, in part, from a paper I wrote more than a decade ago, which was published inthe Summer 1995 Issues in Science and Technology, and in part from a workshop I co-chaired w ith Jim Duderstadt at the National Academies in 2001.1 Some of the contenthas had to be updated, but the basic theme is as relevant now as it was then: Foruniversities, the rapid evolution of information technologies presents challenges andopportunities that are not w idely or fully understood. I can best convey this w ith aparable.

1. The Panel on the Impact of Information Technology on the Future of the Research University, January 2001. NationalResearch Council of the National Academy of Sciences, National Academy of Engineering, and Institute of Medicine,Washington, D.C . James Duderstadt is president emeritus and university professor of science and engineering at theUniversity of M ichigan.

[ 96 ]


It's New Year's Day, 1895. My name is Hans. For seven generations,my family has made the finest buttons in the region, using the goodlocal horn.

Today I learned that the railroad is coming to our village. My friendO laf says that cheap factory buttons w ill come on the trains, but theyw ill never compete w ith my craftsmanship.

I think he is right, and wrong. They w ill come, but they w ill competew ith my buttons. I must make some choices. I can become adistributor for the new buttons, or I can invest in the machinery tomake buttons and export them. Or, closest to my heart, I can refinemy craft and sell exceptional buttons to the wealthy.

My family's business is dead. I cannot stop the train; I must change.2

Simply put, universities are in the information business, and the informationrailroad is coming!

W ith 20-20 hindsight, it’s easy to accept the demise of a quaint industry—or,more accurately, the demise of a quaint method of manufacture, distribution, and sale.The button industry flourishes, of course. Even the craft of handmade buttons is doingwell, if my local art fair is any indication. However, the nature of the industry changeddramatically as technology allowed the manufacture and distribution of vastly lessexpensive but highly serviceable buttons.

It’s harder to look inward at the university, w ith its tradition and obvious socialvalue, and introspect about whether it might change in dramatic ways. But, althoughits roots are millennia old, the university has changed before. In the seventeenth andeighteenth centuries, scholasticism slow ly gave way to the scientific method as the wayof know ing truth. In the early nineteenth century, universities embraced the notion ofsecular, “ liberal” education. In the late nineteenth century they included scholarshipand advanced degrees as integral parts of their mission. After World War II theyaccepted an implied responsibility for national security, economic prosperity, and publichealth in return for federally funded research. A lthough the effects of these changes

2. I owe the idea for this parable to remarks by Prof. Jeff Ullman of Stanford at a meeting of the heads of ComputerScience and Engineering Departments, July 1994.

[ 97 ]


have been assimilated and now seem “natural, ” at the time they involved profoundreassessment of the mission and structure of the university as an institution.

Let me be clear. Higher education w ill flourish, just as does the button industry.If anything, the need for advanced education is increasing across multiple dimensions.More people need to be educated to be productive in an increasingly technologicalworkplace. The period during which particular skills are relevant is shortening, so theneed for lifelong learning is grow ing. The know ledge and skills necessary to work at thefrontiers of know ledge are increasing as well, and so, w ith it, the need for advanceddegrees.

So higher education is not in danger. But we would be w ise to ask whetherthe particularly quaint ways that universities produce and deliver that education w illsurvive. I think there w ill be major changes—not only in the execution of the mission ofuniversities, but in our perception of the mission. Moreover, in the words of MaryeAnne Fox at the above-mentioned Academies workshop: The change w ill be profound,rapid, and discontinuous.3 As someone else said at that workshop, informationtechnology w ill transform not only the intellectual activities of universities, but the waythey are organized, financed, and governed.

Thus, we must engage in an intellectually honest exercise of trying tounderstand the implications of technology for our institutions. Before proceeding,however, we need to dispense w ith two issues. First, is the button analogy valid?Second, is the technology for higher education really going to change all that much?

Certainly, some specifics of the button parable are inappropriate. Universitiesdon’t make a product that could be mechanically mass-produced, for example, andwhat universities do is much more complex than what button-makers once did. But,while there are differences, it would be a mistake to dismiss the similarities. Both buttonmaking and higher education are very labor-intensive activities that depend on the skillof master artisans. Both have been regional, requiring collocation of the producer andcustomer. Both have long traditions. Both contributed to the prestige of their locale.Both evolved powerful guilds to protect the masters. And, now the university also isfaced w ith a technological revolution.

Universities share at least some of the attributes of other vertically integratedindustries, as well. We “manufacture” information (scholarship) and occasionally

3. Marye Anne Fox is the former chancellor of North Carolina State University and, since 2004, chancellor of theUniversity of California, San Diego.

[ 98 ]


“reprocess” it into know ledge or even w isdom; we warehouse it (in libraries); wedistribute it (in articles and books), and we retail it (through classroom teaching).Information technology already has changed each of these, and the future changes w illbe much greater. Like industries that have been overtaken by technology, we need tounderstand its individual and collective impacts on our basic functions. It's not acomfortable thought, but we must at least consider that a change in technology—achange that w ill facilitate the flow of our essential products: information, know ledge,and even possibly w isdom—might provoke a change in the nature of the enterprise.

One of the hardest things for most people to grasp about informationtechnology is the compound effect of its exponential rate of improvement. For the lastfour decades, the speed and storage capacity of computers has doubled every eighteento twenty-four months; the cost, size, and power consumption have been reduced atabout the same rate. The bandw idth of computer networks has increased even faster,and Internet traffic has grown by many measures, from the numbers of users to themagnitude and nature of what they send and do on the Internet. For the foreseeablefuture, all of these trends w ill continue; the basic technology to support them exists now.

The compound effect of this rate of improvement is hard to appreciate.Speaking of ENIAC , the first fully electronic digital computer, a 1949 article in PopularMechanics magazine said:

" ENIAC contains about 18,000 vacuum tubes and weighs 30 tons,but in the future computers w ill contain only about 1,000 tubes andweigh only 11/2 tons. "

Today, to demonstrate the effect of the exponential improvement in computerhardware, I carry a computer in my briefcase that is one hundred times faster than theENIAC . It’s not my laptop or even a PDA . It’s a holiday card that plays a tune whenopened! It’s intended to be used once, to make the recipient smile, and then bediscarded. It costs less than a single vacuum tube and, of course, contains none.

The first finding of the Academies’ workshop was that the extraordinary paceof information technology evolution not only is likely to continue for the next severaldecades, but could well accelerate. For most of the four decades that I have been incomputing, someone would observe that there are physical limits: “This exponentialpace of change can’t go on forever. ” That’s obviously true, but the slowdown is not onthe horizon, and it’s not going to spare us from rethinking the university.

[ 99 ]


The w ise thing to do in such cases is to imagine a range of scenarios thatmight result. None of them w ill be exactly right, but the discipline of thinking aboutthem w ill improve our ability to respond to, and to shape, what does happen. The onlyreally dangerous course is to assume that something won’t change just because today’stechnology doesn’t support that change. That’s a guarantee to be unprepared.

A Spectrum of PossibilitiesHow might we use this equipment to change education and scholarship? That

seems like a simple question, but as both an academic and a computer scientist, I don’tknow. Ironically, although we can sometimes predict the improvement in technologyw ith precision, predicting the societal impact of that improvement has been difficult.Certainly, know ledge—its creation, storage, and communication—is part of the essenceof a university. The ability to process information, the raw stuff of know ledge, thus sitsat the heart of what the university is and does. A technology that alters that ability byorders of magnitude cannot avoid having an impact on at least how we fulfill ourmission, and possibly on the mission itself.

As a start, we might look at several functions of our vertically integratedinformation business and note how they have been and might be changed.

Scholarship: The impact of information technology on scientific research isboth apparent and pervasive. Scientists now routinely talk of computation as the “ thirdmodality” of scientific investigation, on a par w ith theory and experimentation.

The easy examples are those that simply automate what was done manually:the reduction of data, the control of instruments, etc. The profound applications,however, are those that lead to whole new areas of research and new methods ofinvestigation—and thus to science that was not and could not be done before: the finalproof of the four-color conjecture, analysis of molecules that have not beensynthesized, measuring the properties of a single neuron by grow ing it on a silicon chip,watching a model of galaxies collide, and letting a scientist “ feel” the forces as a drugdocks in a protein. These applications have transformed the nature of scientificinvestigation; they led to asking questions that would not even have been asked before.

I don't think science, however, w ill be where we see the most dramatic impact.I say that despite a report from the National Research Council that I helped to co-authorthat paints an expansive image of the transformation of scientific research.4 Instead, I

4. National Collaboratories: Applying Information Technology for Scientific Research, National Academy Press, 1993.

[ 100 ]


believe that a more dramatic transformation is about to shake the foundations ofscholarship in the liberal arts. Humanists, more than scientists, w ill lead the way toinnovative applications of the technology in the university.

The comfortable stereotype of humanists as technophobic just doesn’t applyanymore. The availability of both text and images in electronic form, coupled w ith theprocessing power of modern computers, allow the humanist to explore hypotheses andvisualize relations that were previously lost in the mass of information sources. Thepresentation of humanists’ scholarly results in electronic form is moving even faster.Precisely because of the complexities of the relationships they need to present, and thesubtle webs of relation and inference they need to express, electronic hypertext booksand journals are emerging. Indeed, they are emerging faster, w ith more vigor, and w ithmore effect on their disciplines than are their counterparts in the sciences.

We all expect scientists and engineers to use computers in their research, butthe notion that information technology could be central to humanistic scholarship is abit more startling; at least it was to me. In large measure, it was talking about theapplication of computers to historiography and the theory of text that opened my eyesto the larger issues I am trying to raise here, and that also formed the basis for theInstitute for Advanced Technology in the Humanities (IATH) at the University of Virginia.

IATH was founded in the early 1990s to explore how information technologycould be used to support humanistic scholarship. As w ith the sciences, there are easyexamples that automate what had been done manually—creating concordances, forexample. We have just scratched the surface of the profound examples, but again wesee the ability to ask and answer questions about the human record that would nothave been asked before. We also see a shift in the sociology of scholarship, from strictindividual scholars to teams, for example.

Textbooks: I don’t know anyone who prefers to read from a computer screen,and besides, you don’t want to take a computer to the beach—or so say the nostalgic.They are right, and yet so profoundly wrong.

There are two fallacies here. The first is the assumption that electronic booksw ill contain only text, and thus be essentially the same as paper books but presenteddifferently. In reality, it w ill not be possible to reproduce an electronic book on paper.These books w ill not be simple linear presentations of static information. They w illcontain animation and sound. They w ill let you access the data behind a graph byclicking on it, allow you to try alternative analyses of that data, and perhaps lead tonew norms for data sharing. They w ill contain multidimensional links so that you can

[ 101 ]


navigate through the information in ways that suit your purpose rather than theauthor’s. They won’t contain references to sources, but the source material itself; thecritique of a play w ill “ contain” its script and performance. They w ill have tools that letyou manipulate equations, trying them on your own data or modifying them to testscientific hypotheses. They w ill let you annotate and augment the document for use bylater readers, so making it a living document.

The second fallacy is presuming that today’s technology, or something similar,w ill be tomorrow’s. We should not be thinking about reading these electronic booksfrom today’s screens. The advantages of the electronic book w ill be so strong thatengineers w ill make the form factor of the medium human-friendly. Flexible “electronicpaper” already exists, w ith a resolution as good as that of the printed page, and in thefuture it won’t necessarily be packaged in the kinds of e-book devices now on themarket, which have made great advances in their readability. Why would anyone lugaround several heavy books when something the size, clarity and readability of a singleone contains them all? I mean all—all the books in the Library of Congress. I w ill takethat to the beach!

Libraries: For thousands of years, libraries’ focus has been on the containersof information, books. The information itself was the domain of the library’s users, notthe library. Information technology turns that premise on its head and, w ith it, many ofthe deepest unstated assumptions about the function of a library.

Tracing back to A lexandria and before, the librarians’ principal objective hasbeen to build the collection—to amass a set of materials was their measure of worth.But, in the future, a library w ill not “ collect. ” Electronic information can becommunicated virtually instantly, so its source location is irrelevant. Instead of being ahoarder of containers, the library must become the facilitator of retrieval anddissemination.

If we project far enough into the future, it’s not clear whether there is adistinction between the library and the book. The “ technology” of the bibliographiccitation pales by comparison to the hypertext link—to the ability to gain immediateaccess to the full referenced source, and thence to browse through the context of thereference. It w ill take a long time to build the web, and especially to incorporate thepaper legacy, but the value of a seamless mesh w ill doom the discrete, isolated volume.

As the library and the book merge, it seems compelling to me that anothermerger w ill accompany it—a merger precipitated by devolving disciplinary boundaries.Know ledge isn’t inherently compartmentalized; there is only one nature; there is only

[ 102 ]


one human record. The division of the sciences into physics, chemistry, etc., and theirfurther subdivision into physical and organic chemistry, is a human imposition, as is thedivision into history, English, and anthropology. For very practical reasons, paper textshave mirrored this artificial division, but those “practical” reasons evaporate in theelectronic world. C learly, the “ long pole in the tent” w ill be human rather thantechnical; disciplines are complex and idiosyncratic social structures that w ill not easilydissolve. However—and here I can only speak w ith limited authority even ontechnological disciplines—much of the most interesting work already is happening atthe boundary of traditional disciplines. That’s not news; Einstein opined that most ofthe important science lay at the interstices of traditional disciplines. What is new is thatwe have technology that facilitates incremental accretion of know ledge at theseinterstices.

Finally, note that the book as we know it is passive; today’s books sit onshelves waiting for us to read and interpret them. While there is an intellectual thrill indiscovery and interpretation, passivity of the text is not required for that. As MarvinM insky, a professor at MIT, said, “Can you imagine that they used to have librarieswhere the books didn’t talk to each other?” One of the profound changes in store forlibraries is that parts of their collection w ill be active, w ith software agents collecting,organizing, relating, and summarizing on behalf of their human authors. They w ill“spontaneously” become deeper, richer, and more useful.

Teaching: The notion of computer-aided instruction has been touted for thirtyyears. Frankly, it has had relatively little impact, especially at the university level. Thereason is obvious: Chalk and overhead projectors have been perfectly adequatetechnology given the current nature of scholarship and texts.

If, however, the bulk of the professorate are using information technology intheir scholarship, and the results of that scholarship can only be exhibited using thetechnology, the classroom w ill follow rapidly. How w ill it follow? Not, I think, by theautomated-drill scenario we have come to associate w ith computer-aided instruction.

Beyond automated drill, the obvious application of technology istelepresence—the possibility of involving remotely sited individuals in a seminar, forexample. Again, do not think in terms of today’s teleconferencing technology; as thefidelity of communication improves, telepresence w ill certainly happen. While now it’s abig deal to bring a leading authority to campus, and access to the person is oftenlimited to research colleagues and graduate students, this w ill not be the case in thefuture. The technology w ill give an increased number of undergraduates access to these

[ 103 ]


authorities. Relieved from the overhead of travel, who among us would not cherish afew hours each week w ith the bright young minds at a remote Harvard or Yale?

These are interesting but mundane applications—mundane in the sense thatthey do not change the educational process in a deep way. More fundamental is theopportunity to involve students in the process of scholarship, rather than merely in itsresults. We like to say that we teach students to think, not merely to learn rote facts,but in truth:

— We mostly limit students to thinking about what has been thought before.We can’t ask them to explore new hypotheses, because of thepracticalities of access to sources and the sheer grunt work of collectingand analyzing data. Information technology eliminates those“practicalities. ”

— Students are forced through the linear sequence of the text, course andcurriculum before we judge that they “know enough” (facts) to embarkon a scholarly project (think).

A hint of the kind of change that lies ahead can be detected in the impact ofThesaurus Linguæ Graecae on scholarship and education in the classics. This long-running project at the University of California, Irvine has compiled a database of nearlyall extant Greek literature from Homer through the fall of Constantinople, plus a goodbit written since then. Available on CD-ROM or online, this database has enabledundergraduate participation in research.

A more personal example for me is a project created by the C ivil War historianEd Ayers at IATH.5 Ed’s project, The Shadow of the Valley, details the lives of some10,000 individuals who lived at opposite ends of the Shenandoah Valley, incommunities that were very similar except for being on opposite sides in the AmericanC ivil War. Richly hyperlinked, The Shadow of the Valley provides an invaluable resourcefor students and scholars alike, and it irrevocably changed Ed’s courses on the C ivil War.He could no longer tell a simple linear story because his students had too much accessto the messiness of real history. Instead, Ed concentrated on historiography—theprocess of historical scholarship—using the War and The Shadow of the Valley.

One cannot leave the subject of teaching w ithout mentioning the subject of“productivity”—a code word that reflects the public’s frustration w ith the rising cost of

5. In 2007, Edward Ayers was named president of the University of Richmond.

[ 104 ]


higher education and the perceived emphasis on research over teaching. In the mostsimplistic interpretation, a call for increased productivity would mean that we wantprofessors to channel their energies into teaching more material to more students, sothat the process becomes more cost-efficient.

The irony, of course, is that one of the oldest measures of merit for anyschool—a low student/teacher ratio—is diametrically opposed to this sort of“productivity. ” Information technology is not going to resolve this tension; for our ownchildren we want relatively individual attention from the most qualified, intellectuallyalive professors possible. Information technology can, however, shift the focus of thediscussion to the effectiveness and quality of the student/teacher interaction rather thanjust the number of contact hours.

Indeed, in modest ways it already has shifted that focus. By removing thebarriers of space and schedule, for example, e-mail has given my students much greateraccess to me than ever before. Involving students in the process of scholarship andgiving them greater access to international authorities are more profound shifts, but Isuspect that these are still just pale precursors of what we can do. Part and parcel ofrethinking the impact of technology on the university is addressing precisely this issue.

Rethinking on a D eeper Level: the Nature of the EnterpriseWhether or not you agree, I hope this discussion has at least suggested how

activities in the academy might change. Even so, that does not imply that the nature ofthe university as a whole w ill change. W ill it?

One approach to answering such a question is to examine unstatedassumptions. That’s hard, but I would like to examine just one.

Historically, a university has been a place. The stone walls of St. Benedict’sAbbey at Monte Cassino were meant to provide defense against the physical andintellectual vandals of the dark ages. In American colonial times, Jefferson’s AcademicalVillage provided access to scholarly materials as well as collegial interaction bycollocation. In other places and times, scholars flocked to scientific instruments andlibrary collections. And, where the scholars assembled, the students followed.

In his influential nineteenth-century essays on The Idea of a University, JohnHenry Cardinal Newman wrote:

[ 105 ]


“ If I were asked to describe ... what a University was, I should drawmy answer from its ancient designation of a Stadium Generale ... Thisdescription implies the assemblage of strangers from all parts in onespot. ” 6

The Cardinal then went on at some length to emphasize that books were aninadequate source of true education that must be buttressed w ith discourse—whichobviously was only feasible if the discussants were collocated. Thus, the notion of being“ in one spot” was, to him, essential to the very definition of the university; as he wrote,“Else, how can there be any school at all?”

But, w ith the possible exception of teaching, to which I’ll return in a moment, Ibelieve that information technology obviates the need for the university to be a place.

Once again, please remember that, although we are presuming technologybetter and cheaper than today’s, this is not hypothetical. The trends are clear; thecapabilities for at least the next decade are predictable and, in many cases, thetechnology is already in the laboratory. Only how we w ill use the technology is inquestion.

W ith powerful, ubiquitous computing and networking, I believe that each ofthe university’s functions can be distributed in space, and possibly in time.7 Remotescholarship and authoring are the direct analogs of telecommuting in the businessworld, and every bit as appealing. Academics tend to identify more closely w ith theirdisciplinary and intellectual colleagues than w ith their universities. Freed from the needto be physically present in classroom, laboratory, or library, grouping by intellectualaffinity may be more appealing. But even then, physical grouping may be unnecessaryand even undesirable as such things as location preference are taken into account.

There are some disciplines that need shared physical facilities, say a telescope,and that thus seem to suggest the need of a “place. ” But large scientific instrumentssuch as telescopes and accelerators already are run by consortia and shared by thefaculty from many universities, and many of these facilities do not require the physicalpresence of the investigator, who could be online and have access via the network.Thus, the university as “place” already is irrelevant to at least some scientificscholarship.

6. From the Rise and Progress of Universities, Chapter II.

7. See, for example, the Sloan-sponsored work on Asynchronous Learning Networks.

[ 106 ]


As w ith instruments in the sciences, direct access to archival materials isnecessary for some humanistic scholarship—but hardly all, and certainly not all of thetime. Ponder the excitement, for example, caused by the release of images of the DeadSea Scrolls, even though the scrolls themselves are not accessible to most scholars. Ifanything, the ubiquitous information infrastructure w ill provide greater access toarchival materials to a much larger set of scholars, of a quality that’s “good enough”for most purposes.8

As for teaching, we don’t really know whether it can be distributed or not. I do know that even asking the question is considered heretical by some goodteachers—teachers who contend that physical eyeball-to-eyeball contact is necessary.Others, including me, contend that, although they need feedback to teach well, there is a threshold of fidelity beyond which one does not need to go; student andteacher probably don’t need to smell each other, for example. Thus, there is some finite amount of information required to produce an adequate representation of theparties. If true, when that threshold of fidelity is reached electronically, high-qualityteaching w ill be distributed. The fallacy in Cardinal Newman’s reasoning was only thathe could not imagine quality discourse at a distance—but that is precisely what thetechnology enables.

Could institutions such as universities, that have existed for millennia and areicons of our social fabric, disappear in a few decades because of technology? If youdoubt it, check on the status of the family farm. W ill the “university as place” inparticular disappear? I expect not; the reduced importance of place does not imply noplace. However, just as farming has been transformed, so w ill the university. Theeveryday life of both faculty and students w ill be very different.

Q uestions, Q uestionsI have more questions than answers as to the new shape of the new university.

Having now laid the groundwork, let me pose a few of these questions:

• I believe that higher education not only w ill survive, it w ill flourish. But arethe choices for universities, like the choices for Hans, to become eithermass-market manufacturers or distributors on the one hand, or niche

8. One of the interesting sociological changes we have observed at IATH is that humanistic scholarship has become ayear-round activity. Whereas scholars could previously only access materials during a summer trip to the place wherethe materials were housed, they can now access them during the rest of the year online.

[ 107 ]


tutors to the privileged on the other? A lternatively, is there some othermodel more appropriate to academe?

• Does it really make sense for every university to support the fullcomplement of disciplines, or should universities specialize and sharecourses in cyberspace? This might be a natural consequence ofaggregation by disciplinary affinity, for example.

• The decision by MIT to make its courseware freely available has stimulatedother universities to similar benevolence. It is too soon to assay the impactof these decisions, but could the ability of smaller and non-U.S. schools todeliver high-quality instruction in deeply technical areas be greatlyenhanced?

• M ight professors affiliate w ith several institutions, or become freelancetutors to telepresent to students? Indeed, might we go “back to thefuture” of tele-itinerant scholar/tutors?

• M ight some employers (and hence students) prefer a transcript that listsw ith whom certain courses have been taken rather than where? In thetele-itinerant scenario, one could imagine a bright student not only self-designing a program of study but also choosing an “all-star” faculty for it,by applying to study w ith the leading experts in key subjects regardless oftheir locations or affiliations. Wouldn’t that student then appear to bebetter qualified than someone whose learning was confined to a singleuniversity, even a very good one?

• What about alumni and sports? Surely the allegiance of alumni to theiralma mater has a great deal to do w ith place, and in the United States iscemented on football weekends. And, since alumni support has becomeessential to universities, isn’t that very human need sufficient toperpetuate the university as place? Perhaps. But alumni programs andlarge sports programs are themselves evolving in relation to place—universities have alumni chapters around the world and in online virtualworlds; their sports teams recruit and are marketed w idely—and a betterquestion may be: How might these programs go on evolving?

• W ill universities merge into larger units as the corporate world has done,or w ill the opposite happen? I could argue either side of this question. Onthe one hand, if a university isn’t (just) a place, its major remaining

[ 108 ]


function is certification—it certifies the competence of the faculty, theprograms, and the graduates. We don’t need thousands of organizationsto do that. On the other hand, I can envision many small colleges beingempowered to provide a broad curriculum via telelocation while retainingthe intimacy so valued in our small liberal arts institutions. I don’t knowanyone who really wants the impersonal ambiance of a mega-university.The current size of these universities seems optimized for the physicalinfrastructure, not for education or scholarship.

• For-profit universities have flourished recently, and several have high“ customer satisfaction” ratings because they are convenient for workingstudents, but also because they have developed curricula and pedagogythat take advantage of the most modern understanding of how peoplelearn. M ight we see outsourcing of large introductory courses, which mostresearch-oriented faculty don’t like to teach anyway? If so, what happensto the cross-subsidy from these courses that supports small upper-levelundergraduate and graduate courses?

• M ight technology revive the talented amateur’s participation in thescientific community? Except for a few disciplines like astronomy, thetalented amateur largely has disappeared from scholarly discourse inscience and engineering. Surely such individuals still exist, but they areisolated from the community of scholars. How can/should the universityre-engage them?

• What about the various businesses that have affiliated w ith universities—the university press being an especially poignant example? My guess isthat each of these w ill be forced to rethink its principal mission, and manyw ill be irrelevant.

• W ill more (most?) universities serve a global clientele, and how does thatsquare w ith the publicly supported university in the United States andelsewhere? In particular, w ill private universities have greater flexibility toadapt to globalization, thus dooming the public universities?

• Does the function of socializing young adults, which perhaps remains areason for “place, ” need to be coupled w ith the educational function, orcould it be done better in some other form?

[ 109 ]


Some w ill interpret these questions as threatening; I don’t. That there w ill bechange seems inevitable. But, change always implies opportunity and, in this case, theopportunity is to improve all facets of what we do in the academy. The challenge is toanticipate and exploit the changes.

Procrastination and inaction are the most dangerous courses for colleges anduniversities in this time of technological evolution. Dispassionate contemplation of thewhat-ifs and careful examination of our often-unstated assumptions are the bestpreparation for preserving—and, better yet, expanding—the critical roles thatuniversities play in our society. Universities are in the information business, and theinformation railroad is coming.

[ 110 ]


The Role of the G lobal University In Accelerating D iscovery-to-Product in BioPharmaceuticals:

Some ‘Black Swan’ Scenarios

by Frank DouglasSenior Fellow, Kauffman Foundation

Frank Douglas advises the Kauffman Foundation as a senior fellow. He is a partner of PureTech Ventures, and the founder and first executive director of the MIT Center for Biomedical Innovation.At MIT, he was the Professor of the Practice in the Sloan School of Management and also heldappointments in biology, biological engineering, and the Harvard-MIT Division of Health Sciences andTechnology. Formerly, Dr. Douglas was executive vice president and chief scientific officer of Aventis. Hereceived the 2007 Black History Makers Award and tw ice was named G lobal Pharmaceutical R&DDirector of the Year. He holds a PhD in physical chemistry and an MD from Cornell University. As an MD,he was an intern and resident in internal medicine at the Johns Hopkins Medical Institution and a fellowin neuroendocrinology at the National Institutes of Health.

A ll speakers bring their own backgrounds to their topics, and I am

no exception . I have spent my entire career in biopharmaceutical

research; as an academic, as a practicing medical doctor, as the

chief scientific o fficer at a major pharmaceutical company, and as a funder

of biotech startup ventures. In short , I’ve had the opportunity of working

across the whole ecosystem of biopharmaceuticals.

I w ill draw on this background in my remarks today on the variety of roles thatglobal universities could play in re-shaping and ideally improving the biopharmaceuticalecosystem to make it work better. I realize this may strike some as a narrow industry-specific subject. But the development of new pharmaceuticals is essential to curing orcontrolling many diseases, and university-based research historically has been critical tothis process. As universities increasingly “go global, ” as President A lan Merten has

[ 111 ]


discussed w ith us today, it is important to address what impact this trend w ill have onthe biopharmaceutical ecosystem.

The G lobal University I begin w ith a threshold question: What is a “global” university, exactly?

Rather than try to define it by describing a set of features, I’ll offer a functionaldefinition—an ideal mission statement to adopt, if you w ill:

A global university enables people to anticipate, and to generate solutions for, global problems and opportunities.

The “people” in this statement include the students, faculty, and third partiesw ith whom the university interacts. And the rest of the mission statement is, in a sense,really just a matter of applying scientific method globally,to problems of global import. The Internet and all theother technologies and methodologies at our commandhave given us the ability to gather tremendous amountsof data on almost any topic—from all over the world.When you’re able to gather a lot of data, you can formhypotheses. As you form hypotheses you get into thebusiness of anticipating. The challenge is capturing know ledge that you can use to seewhat lies ahead and to make things happen. This entails designing experiments to testthe hypotheses, and, as you learn from the experiments, you begin to see the problems,solutions, and opportunities ever more clearly. A global university engages in thisparadigm of generation and testing of hypotheses to better understand and addressproblems of global human significance.

Now let’s expand on this definition by introducing the concept of “place. ”Earlier, President M ichael Crow stressed the importance of leveraging “place” for auniversity. And closely related to that idea is the one that Manuel Trajtenberg raised—that the university has to be an endogenous institution, an integral part of itscommunity and environment. These are tricky notions to act upon, because our senseof place and community has been changing. We keep hearing that we live in a globalvillage, which means we should see the whole world as our community. Does this,then, mean that a global university should be everywhere, w ith campuses all over theworld? Or conversely, does it mean that physical location doesn’t matter at all, as longas you are linked up virtually w ith the rest of the world? My answer is: neither. I’d liketo propose an entirely different way of defining the role of place for a global university:

A global universityenables people toanticipate, and togenerate solutions for,global problems andopportunities.

[ 112 ]


Wherever it is located physically—in one location, or in several—aglobal university serves as a meeting point for the global village.

A “meeting point” has several meanings. First, it’s a place where people canmeet in the sense of getting to know one another, as in: “ I’m glad to meet you; thiscould be a productive relationship. ” Or, much like a designated meeting point in anairport, it’s a place you can come to in order to find a particular person or kind ofperson, such as an expert for a specific project. A meeting point also is a place toexchange and discuss information, as you do when you “have a meeting. ” And, ofcourse, it’s a place where people congregate for ongoing work of much longer durationas well, just as they do in an office or factory.

At a global university, people from all over the global village meet in all ofthese senses, both physically and virtually. And, ideally, the university also takesadvantage of its physical location. It does this by becoming a meeting point for certainkinds of work that can be enhanced by being done in that location—for instance,because there are other institutions or industries nearby that do those kinds of work.

One university that has established itself very firmly as a global meeting point isMIT, where I’ve been on the faculty. MIT has large numbers of foreign-born students

and faculty on campus, so members of the global villageare meeting there physically. It also has internationalpartnerships, like the Cambridge-MIT Institute, in whichpeople are always going back and forth physically as wellas communicating virtually. And, to bring us back to myoriginal definition of a global university, one of thosepartnerships is the A lliance for G lobal Sustainability. MIT,along w ith universities in Europe and Japan, created thisA lliance in 1997—before sustainability was w idelyrecognized as the global hot-button issue that it hasbecome today. So, that’s an example of a university using

its meeting-point status, harnessing the power of the global village, to “anticipate, andgenerate solutions for, global problems and opportunities. ”

Now let’s look to the future. Let’s start thinking imaginatively, and see how wemight use these concepts to address other global issues—perhaps in ways that haven’tbeen tried yet, to achieve results that haven’t been achieved thus far. And to do this Iw ill introduce one more concept, because we’re going to be looking at “black swanscenarios. ”

O ne university that hasestablished itself veryfirmly as a globalmeeting point is MIT.MIT has large numbersof foreign-born studentsand faculty on campus,so members of theglobal village aremeeting there physically.

[ 113 ]


The Black Swan Nassim Nicholas Taleb, a distinguished Lebanese finance expert living in the

United States, has written a popular, highly-acclaimed book called The Black Swan: TheImpact of the Highly Improbable. The title refers to the fact that long ago in Europe,people assumed that all swans were white. The term “black swan” was a metaphor forsomething that didn’t exist or couldn’t happen, but, in fact, actually did occur (as someEuropeans journeying to Australia discovered when they did see black swans). Today, inthe sense that Taleb and others use it, a black swan event is understood to be a high-impact event that was unexpected or at best seemed highly improbable. One exampleTaleb gives is the terrorist attacks of 9/11, and another is the emergence of the Internetas we now know it.

I suspect that each of you can name other “Black Swan” events. Indeed, Ithink we now live in a world where the highly improbable is becoming not soimprobable. A ll around the world, in many different fields of endeavor, there are somany people, technologies, and systems in the mix that the possibilities keepmultiplying, and more and more the main limitation is what we can imagine doing.

Please keep all this in mind when you look at the “black swan scenarios” I w illdiscuss next. They are scenarios that may seem unlikely to occur, or difficult to create,but they are not just fanciful ideas that I’m floating into the blue sky. They are scenariosthat could be created, if the appropriate people set out to do it.

The Issue Area: D iscovering Drugs and Moving Them to MarketFor an example of a global issue area in which we can find both problems and

opportunities, I’ve chosen one that affects us all. It is the process of dealing w ith humandiseases and disorders by discovering new drugs and bringing them to market.A lthough we’ve made great progress in this area—and although the work involved isvery complicated and difficult—many people think that we could, and should, be doingmuch better.

The entire process from discovery to market is a long one; it can takeanywhere from ten years to decades. It can be very expensive and, despite our efforts,there are a number of major diseases and disorders we’ve had little success incontrolling. Thus, what many people see is a situation in which treatments are slow toarrive, are unaffordable or very hard to afford when they finally get there, and never doarrive—or are only of limited help, at best—for some of the most urgent cases.

[ 114 ]


Nothing is more important to anyone than life and health. If ever there were an area in which it behooves us to have the best processes for new-productdevelopment that we possibly can, it’s the area of developing products to preserve lifeand improve health. So, instead of hoping for a white knight to come to the rescue,let’s look for black swans.

The Nature of the ProblemChart 1 shows key factors that come into play in drug discovery, and in any

attempt to develop new paradigms for the process. The chart uses a good bit ofscientific jargon because it’s meant to communicate w ith experts in biochemistry. Forthose of you who are not insiders, I’ll explain a number of the major items briefly.

The chart starts w ith a disease you would like to treat or prevent. The “ target”is something in the body, such as a receptor or a gene, you believe might help. Areceptor is a protein molecule, in the membrane of a cell, that might allow certain other

Target

Label Lead

Functional assignment

Patient stratification In silico privilegedstructures

Consortiaactivities

1. Next Paradigm in Drug D iscovery D epends on ...Impact of Genomics on Drug Discovery

Chemical GenomicsPharmacogenomics

Pathway MappingChemical Biology

Structural Genomics

IntegratedApplication

ofGenomics/Technologies

In silico eADMET,Toxicogenomics/-proteomics

Predictive Biomarkers

[ 115 ]


kinds of molecules from outside the cell to attach themselves to it, thereby changingwhat goes on in the cell. If the receptor w ill bind to unfriendly molecules, then it mightbe part of the disease process; if it w ill bind to therapeutic molecules, then it might bepart of the solution. There are many, many different receptors in different kinds of cellsthroughout the body, just as there are many different genes—and thus, many possibletargets that one could aim for in trying to treat a given disease.

The “ lead” is a compound or antibody that you think w ill have the desiredeffect, if you can deliver it to the target. Here again, there are many possible leads, aswell as many possible pathways by which to deliver them—and I’m alreadyoversimplifying what is a complex discussion. You can use “ in silico” computersimulations to explore the possible effects of a potential lead molecule. Eventually, youhope these w ill lead to in vitro and in vivo experiments that give you proof of concept,so you can proceed to the different phases of clinical trials. The goal is to get a drugapproved and onto the market, w ith a “ label” that specifies how it’s to be used and theeffects that one should expect. And even the “ label” stage is not the end of theprocess, because now you must do follow-up studies of the drug’s long-termperformance and effects in the marketplace. These can sometimes suggest new targets,and the cycle continues.

The ovals in Chart 1 indicate parts of the process where there are a lot of datato be generated, collected, and analyzed; and where better analytic and predictivemethods might lead to better, faster results overall. These are prime areas in whichglobal research universities can, and do, step in to help. In any given case, some of thekey unknowns to be explored as we move around the cycle include:

• Which targets w ill give the optimal benefit/risk ratios?

• Which strategy, small-molecule or biological, should be pursued?

• Which patients w ill best respond to which therapies?

• Which patients w ill be susceptible to which side effects from whichtherapies?

• Which low-frequency side effects are “early warning signs” of muchw ider, or more severe, side effects that might become manifest later?

And there’s more. The triangle in the center of Chart 1 represents twoemerging fields in which we’re learning and developing new things that could beintegrated throughout the process. One is genomics—the study of the humangenome—and another is a range of new technologies that are not strictly biomedical or

[ 116 ]


biochemical, but could have useful applications. They would include new informationtechnologies, new materials, and a host of others.

There’s plenty of room for improvement in the triangle, too, not only in termsof specific inventions and discoveries, but in terms of improving the scientific process.This was demonstrated after the Human Genome Project began, when a private firm,Celera Genomics, stepped in w ith its own approach and wound up accelerating themapping of the genome. So the overall message is as follows: This process ofdeveloping drugs is complex and arduous. But it also presents many opportunities formaking gains.

Finally, in the island in the lower right corner of the chart, I’ve put “ consortiaactivities” to show that universities, firms, and governments are already collaborating inmany ways on various parts of the drug-development process. Let’s now consider somemacro-ways in which this whole structure of scientific investigation might bereorganized to yield more results more quickly—and how global universities might fitinto each of them.

Some Black Swan ScenariosEarlier in this conference, Bill Wulf made the excellent point that a good way

to plan for the future is to paint multiple scenarios, because while none of them w illcome true entirely, some parts of them might—and the discipline of thinking aboutthem helps you to prepare for any or all of them.

That’s what I now invite you to do, as leaders of global universities anduniversity systems. I w ill present four different scenarios for the future of drug discoveryand development. They are scenarios that could result from various forces; none wouldbe driven entirely by universities. But for each one, I invite you to ask how globaluniversities might fit into the picture. How would some of these events impact whatyou’re currently doing? Are there things you’d like to see happen that you could makehappen?

The first scenario is one I call the “Internal” Black Swan Scenario because itconsists of changes that could come from w ithin the biopharmaceutical industry. Somepeople may be skeptical that large pharmaceutical companies can ever really changethe way they operate. But we’ve certainly seen other large firms and industries changethemselves, so let’s take a look at Chart 2:

[ 117 ]


Suppose, first of all, that largepharmaceutical firms decided to nolonger rely so much on their big in-house research departments. Instead,they would focus more on forming“Strategic Discovery C lusters”—alliancesw ith university labs, research institutes,and biotech companies, w ith eachcluster devoted to research around aparticular mechanism or disease. Amongother things, we would then see theemergence of a new type of key personin the industry: the “ A lliance Managers” who direct the clusters.

Suppose, too, that the companies began to shift their spending, so thatinstead of spending tw ice as much on the commercial phase as they do on the R&Dphase—which is typical today—they began moving toward a one-to-one ratio. Thatwould make a lot more money available for the early stages of research. One way thiscould be accomplished is by pushing for market approval of at least some new drugsafter Phase 2B clinical trials, instead of during or after Phase 3 clinical trials. Thus, moremoney could be spent in trying to find the right subset of patients for which the drugwould be efficacious, as well as determining the types of patients who might haveunexpected side effects to the drug, before entering into Phase 2B. In addition, oncethe drug is in the market, there is a broader population on which to test its effects. The“Safe Haven” line at the bottom of Chart 2 refers to the kind of pre-competitive spacewe created when I was at MIT, the MIT Center for Biomedical Innovation. This is a placewhere scientists from academia, industry, and government can work together onproblems related to productivity in innovation. What if the pharmaceutical industryshowed a desire to be involved in more ventures of this type—and what if the industryalso joined the push to change how intellectual property is handled? I think thepotential impact on innovation of joint efforts of this type would be enormous.

A ltogether, the “ Internal” Black Swan Scenario adds up to a sweepingpackage of changes that may seem unlikely to occur, and even less likely to be drivenby the industry itself. But I would point out to you that every aspect of this scenario isalready being tried, or at least contemplated, in some form somewhere. It’s really not ablue-sky fantasy at all. It is a set of changes that any opportunistic company might think

2. Large Pharma W ill Focus on:Strategic Discovery Clusters

New Role for the AllianceManager

Commercial / R&D spend: 2:1 " 1:1

Approvals after Ph 2b

A Changed IP Space

“Safe Haven” and Pre-competitive Space

[ 118 ]


about. So the question I pose to you is: How would an opportunistic global universityrespond to help make this scenario a reality?

Next is what I call the “External” Black Swan Scenario, as it would be driven mainly by forces external to the biopharmaceutical industry. Thekey elements of this scenario are shown in Chart 3. They are possible responses, bygovernments and others, to perceived problems and concerns in health care today.

Here, let’s begin bysupposing that governments andother research sponsors decide tofocus their funding in just a fewareas where the chances of progressseem most likely, or whereconstituencies are pressing thehardest for results. We would alsosee governments and/or privateinsurers mandating the use ofgenerics to cut costs. Regulatorswouldn’t approve a new drug, orallow an existing non-generic to stayon the market, unless the companyhad markers identifying whichpatients were unlikely to be helpedby it and which would have sideeffects.

Suppose further that funding tilts more and more to preventive measures—sothat instead of funding more research on diabetes, for instance, the governmentreimburses my doctor for getting me to lose weight, so my blood pressure goes downand I’m less likely to become diabetic. And finally, what if prices implode across thepharmaceutical industry? Again, I invite you to consider: How would events like theseimpact the role of universities in drug discovery and development, and how could theuniversities respond?

In the third Black Swan Scenario, I am envisioning how some combination ofthe previous two scenarios—plus other developments—could lead to a globally“Restructured” Biopharmaceuticals Industry.

3. ‘EXTERNAL’ BLACK SWANSCENARI O : C HAN GESIMPO SED O N THE IN D USTRY

Funding for research on few conditions: e.g.,Alzheimer’s, some cancers,orphan diseasesMandatory use of generics bydrug class

Identification of responders toefficacy and side effectsrequired for approval andmarketing of all non-generics

Preventive health measures arepreferentially reimbursed

Price controls!!!

[ 119 ]


As shown in Chart 4, youwould first see in this scenario theindustry simultaneously consolidatingand fragmenting, much as a number ofother industries have done in this age ofglobalization. We would be left w ith afew big pharmaceutical companies thatserve mainly as “ integrators” of thework of many small, specialized players.Venture capital plays an increasing rolein this scenario and “virtualeverything”—virtual management,virtual collaboration—becomes the orderof the day. The notion of “outsourcing”in the old sense fades away because it isno longer just a matter of companies shifting production or other activities to cut costs.Everyone is now sourcing everything globally, to wherever it can be done best for anynumber of strategic reasons.

In this scenario, global universities surely would collaborate in new ways w ithindustry and government. Some questions to ask are: What are the possible forms ofcollaboration? What would the most visionary universities be doing?

A ‘Black Swan Pilot Project ’ for CancerThe final scenario that I w ill offer is different from the rest. This is a vision of

a pilot project that could be actively, consciously created by universities working inpartnership w ith others. I w ill describe this scenario in a bit more detail, because not onlydo I think it could happen, I think it must happen—hopefully, sooner rather than later.

The pilot project would be focused on cancer, a disease—or more accurately, aset of diseases—that we’ve had only limited success in treating. A ll cancers have acommon characteristic, which is that cells grow uncontrollably, sometimes spreadingfrom their site of origin. This common characteristic might lead one to think that allcancers, or at least a w ide range of cancers, would be susceptible to a commontreatment regimen—if only we could discover it. But so far, such a breakthrough haseluded us. Despite decades of effort—and despite having an arsenal of interventionsthat range from drugs and surgeries to radiation therapy and other therapies—we can

4. BLACK SWAN SCENARI OF OR A ‘RESTRU CTURED ’PHARMA IN D USTRY

3-4 top-tier Large Pharma asintegrators

Many small specialty players

Venture Capital Firms asresearch translators

Virtuality becomes a Reality

Strategic Global Sourcing

Academia/Government/Industry collaborations

[ 120 ]


only claim fairly good success in treating some cancers, and little to none in treatingmany others.

Experts are starting to recognize that we need to do more than just go onfunding new research projects w ithin the existing frameworks. We need newframeworks, new approaches to conducting the work. That is what my proposed pilotproject would provide. It also would be a means of integrating and enhancing newapproaches already being tried, so we could mount a cohesive, multifaceted effort toconquer what is obviously a multifaceted set of diseases. Some key elements of thepilot are shown in Chart 5.

The first step is to declare, and commit to, a global “ Cancer Project. ” Theproject should have a firm goal and a time frame, such as developing very effectivetreatments for cancer (or for certain cancers) w ithin X years. In that sense, it would besimilar to some previous large-scale scientific efforts in the United States, such as theManhattan Project and the program to send men to the moon, which both had veryambitious goals and demanding schedules.

To marshal the global commitment required for a Cancer Project, there w illhave to be a launch consortium that includes major governments, as well as partnersfrom academia and industry. G lobal universities could network to provide the impetusfor this first, formative step.

Next, the project w ill needglobal “meeting points” to serve asnexuses of activity. Earlier I describedhow a global university itself plays ameeting-point role, but since the CancerProject w ill have a large agenda, I’mgoing to suggest one meeting pointmuch larger than any single university:the entire state of Massachusetts, w ithinthe United States. Work on the projectw ill, of course, go on across the countryand worldw ide, but Massachusetts hasall the key attributes needed forfocusing the attack on cancer. It hasmultiple major research universities—MIT, Harvard, the University of

5. BLACK SWAN PILOTPRO JECT

A global Cancer Project, akinto the Manhattan Project orman-to-the-moon project inthe United StatesMassachusetts as a global“meeting point”

Mechanistic pre-clinical andclinical studies

Methods and tools forpredictive power

Monitoring and measurementtechniques

ManagedAcademia/Government/Industry collaborations

[ 121 ]


Massachusetts, and others. There also are independent research centers, like the Dana-Farber Cancer Institute, and big hospitals, like Massachusetts General. Every globalpharmaceutical company has a presence in Massachusetts. There are hundreds ofbiotech companies, and a large and know ledgeable investment community. Better yet,all these players are already highly networked, both w ithin the state and worldw ide.Finally, Massachusetts has a diverse patient population: W ithin one fairly compact state,people of many ethnic and racial backgrounds reside, carrying a range of genetic traitsand living in environments from a major urban area to rural areas.

In short, if you can bring this whole state on board w ith the Cancer Project,you w ill have an ideal platform for developing new approaches—not only in research,but in every aspect of the work. You’ll have a strong base for developing pre-clinicaland clinical studies, along w ith new tools and techniques for prediction andmeasurement. Academic-government-industry consortia can take a systematic,integrated approach to exploring many kinds of therapeutic tools, from new drugs toengineered devices, and can integrate those w ith new approaches to personalized care.

The project would generate a wealth of data from which to start making newcorrelations. It would provide a highly entrepreneurial regional economy for trying outnew approaches to commercialization and commercial partnership in the anti-cancerarena. Every company that has a new therapy, and every research group w ith a newidea, would want to be part of this Cancer Project in some way. As never before, wewould truly harness global competition, cooperation, and connectivity in the quest tocure cancer. And global universities would be integral to the quest at every step. In fact,as endogenous institutions, they would be constantly re-defining their own roles andtaking on new roles as the project evolves and expands.

A Template for the FutureThe kind of project I’ve just described also can serve as a template for similar

efforts in other global issue areas. Such a template consists of global universities usingtheir expertise, and their networks of connections, to help craft new approaches toglobal problem-solving that are neither bureaucratically planned and managed norsimply left to laissez-faire. You create a framework from which good things can emerge,and you recruit some of the best people and entities from the global village to engagein the work. The key ingredients are:

• A big idea—one that addresses a significant, unmet global need, and isbig enough to fire the imagination of those you would like to engage.

[ 122 ]


• A case for action—a general plan that could work, and that offers distinctadvantages over any alternatives currently being tried. If what you’reproposing is a black swan scenario, a reach beyond what’s currently evenimagined, so much the better. That w ill help to capture the interest ofhighly entrepreneurial types who have the third necessary ingredient:

• A bias for action.

In German, they have three words, wollen, können, machen—to want, to beable, and to do. You have to want to do it; you have to be able to do it; and you haveto make it happen. For global universities that aspire to create the future, I haven’theard a simpler prescription. And for the big idea that I am partial to, a global CancerProject, I like what Nike says: Just do it.

[ 123 ]


Should Universities Be Agents of Economic D evelopment?

by Robert E. Litan and Lesa Mitchell1

It is appropriate that we are ending the conference by addressing the

question of whether universit ies should be agents o f economic

development—because in doing so , we really are addressing one of the

central roles o f the university.

If by “university, ” one means an institution devoted both to the production ofnew know ledge and its dissemination through the teaching of students, then eitherimplicitly or explicitly, the effect of such an organization, regardless of its intention orpurpose, w ill be to foster economic “development” and thus growth.2 Economists havewell established that new know ledge, when successfully commercialized, is the leadingcause of growth in economies at or near the “ technological frontier” (or beyond thepoint where technology can be borrowed or bought from elsewhere and combinedw ith investment in new capital goods). Furthermore, a more educated workforce is bothmore likely to become more productive over time and also to adapt more easily tochange (and thus less likely to resist it, through trade protection or overly onerousregulation that makes the labor market less flexible). Both outcomes clearly contributeto economy-w ide growth.

This much should be non-controversial, and, indeed, essentially a statement offact. The hopefully more interesting question we w ish to focus on here is whether

1. The authors are, respectively, Vice President for Research and Policy, and Vice President for Advancing Innovation atthe Kauffman Foundation.

2. This definition excludes for-profit universities and teaching institutions that are devoted exclusively to teaching, andnot to research; and also research institutes, which are devoted to production of new know ledge and not itsdissemination. Only the “university” does both, and it occupies our attention here.

[ 124 ]


universities should deliberately do more to encourage the development of products orcompanies, whether on a global, national, or local scale. In the process depicted inChart 1, the question is thus whether the university should assist in some fashion in thecommercialization of new know ledge and/or local economic development. In a word,should the university become “entrepreneurial, ” in the commercial sense of the term?

The answer, we suggest, is not “should” but “how. ” In our view, universities—that is, institutions of higher education engaged both in research and teaching—increasingly have no choice whether to be entrepreneurial, although like for-profit firms,they do have a choice about how they go about doing so.

The reason universities have no choice about whether to pursue some type ofeconomic development is simple: because competition requires entrepreneurialbehavior. To be sure, there w ill always be some institutions of higher learning that try toavoid this competition by staying w ithin a narrow niche—such as teaching particularsubjects and students, in limited geographic areas, w ithout being engaged in researchand thus the production of new know ledge—just as smaller retailers choose to avoidcompeting w ith larger retail chains by specializing in the sale of and service for a limitedrange of products. But for universities that seek the prestige and recognition to bemajor players in both know ledge generation and teaching, competition cannot beavoided.

Competition among universities and colleges used to be a defining featureonly of higher education in the United States. In other countries, central governmentshave played the dominant role in funding and directing universities, in some cases(France and Germany, for example) actually employing the faculty. Where governmentsare so heavily involved in funding universities, they also naturally tend to limitcompetition among them, presumably to avoid duplication or playing favorites.

1. The University Knowledge Process

KnowledgeDiscovery &Generation

KnowledgeDissemination

(teaching)

Commercial-ization

& EconomicDevelopment

# #

[ 125 ]


A lthough federal, state, and sometimes local governments in the United Statescontribute to funding of both public and private universities, there is no centralgovernment plan for university research and education as there is in other countries. Tothe contrary, in the United States, universities compete w ith each other on many levels:for faculty, students, administrative personnel, and research funding, and in a variety ofinter-collegiate activities (of which sports is the most visible and expensive example). TheEconomist, in a well-noted survey of higher education in 2005, pointed to the centralrole of competition and the absence of government planning as two prominent reasonsfor America’s success in higher education.3

But America is no longer alone in having a competitive higher educationmarket. Increasingly, as The Economist survey pointed out and as events since then haveonly reinforced, higher education is now increasingly global in scope. Whether or notschools compete w ith each other w ithin a country, many now compete on the globalstage on all the same dimensions, except for sports, as has been true w ithin the UnitedStates: for faculty, students, administrators, and research funding (if not fromgovernments, then from private companies and foundations).

This global competition manifests itself in various ways. Some universitiesprefer to stay at home and try to lure talent to them. Others are going global, typicallythrough partnerships w ith local universities on the ground, but in some cases throughwholly owned and operated campuses abroad. We just heard from A lan Merten, who isleading George Mason in this latter direction.

In competitive markets, firms are compelled to match the leaders and, ideally,to surpass them. In the higher-education market, one of the dimensions in whichUnited States and, most notably, Singaporean universities are now increasinglycompeting is for “star scientists, ” or those relatively rare individuals who combinecutting-edge research skills w ith a bent toward commercializing what they discover,either by licensing their discoveries to existing commercial entities or by launching (ontheir own or, more typically, w ith entrepreneurs) new companies. To a significant extent,this competition in the United States has been spawned in the wake of the Bayh-DoleAct of 1980, which enabled universities to retain intellectual property rights in thediscoveries of their faculty who were funded by federal research grants. To helpmotivate these faculty members to make such commercially useful discoveries,universities now typically give them a share in the proceeds from the “ IP” that is so commercialized.

3. “Secrets of Success, ” The Economist, September 10, 2005 (Survey).

[ 126 ]


To be fair, American universities and their faculty have long had a commercialbent, pre-dating Bayh-Dole. The same Economist survey to which we have just referredcited the “useful” feature of university research and teaching in the United States asthe third reason for its historical preeminence in higher education. The survey quotedthe famous American historian, Henry Steele Commager, as saying that, even in thenineteenth century, for the average American, “education was his religion, ” providedthat it “be practical and pay dividends. ” 4

Universities in the United States have reflected this ethos, but their quest forboth practicality and dividends has intensified considerably in the wake of Bayh-Doleand the substantial increase over the past several decades in U.S. government fundingfor university-based research, especially in the life sciences, which often can lead tocommercially successful products (especially pharmaceuticals and medical devices).Many U.S. universities now have “ technology licensing offices” or “ technology transferoffices” (TLOs or TTOs), whose sole job is to identify commercial applications fordiscoveries made by university faculty and to realize revenue for the university in theprocess. Indeed, as we have elsewhere discussed and w ill return to shortly, we believethat many U.S. universities have put too much pressure on their TLOs to generate short-term profits, which ironically may be encouraging these offices to neglect manyostensibly “second tier” discoveries that also have commercial value, thus reducing thelong-term benefits of technology commercialization.5 The prominent focus at alluniversities today is based upon a single patent-license pathway to commercialization,while providing relatively little or minimal strategy and resources required to supportother means of promoting commercialization and entrepreneurship.

Chart 2 illustrates the types of other commercialization activities thatuniversities pursue, at least in the United States. Universities seek corporate funding todefray the costs of their existing personnel and facilities, attract new star faculty (byfunding new positions and spreading the word that their university is a “hot place” forrising and established star researchers to be), and provide the opportunity for facultyand graduate students to work on commercially relevant research. (While federalagencies historically have funded only basic research, some agencies, including theNational Science Foundation, are funding more applied research, w ith potentiallynearer-term prospects for commercialization). “Proof-of-concept” centers are more

4. Ibid., at 6.

5. Robert E. Litan, Lesa M itchell, and E.J. Reedy, “The University As Innovator: Bumps In The Road, ” Issues in Scienceand Technology, Summer 2007.

[ 127 ]


recent ways for universities and their faculty to test the commercial feasibility of newknow ledge, and thus act as precursors to commercial licensing or to the formation ofnew companies.

University commercialization, to the extent it is “successful, ” clearly providesmonetary benefits to the university and relevant faculty (and, often, typically thedepartments in which the responsible faculty are situated). But we believe an equally, ifnot more important, objective, or at least impact, of commercialization is the directeffect it has on faculty recruitment, and because star faculty tend to attract starstudents (especially graduate students), indirectly on the recruitment of star students.

A lthough we have seen no formal studies of this proposition, we knowanecdotally that universities compete for star faculty not only on the basis of thesalaries they can offer these individuals, but on other dimensions: the amount ofresearch support (which typically translates into how many graduate students thesestars can supervise and effectively employ) and the monetary arrangements fromcommercialization activities (typically the percentage of total royalties the universitycollects or the royalties faculty must pay the university if they launch their owncompanies). To our know ledge, the monetary arrangements relating tocommercialization tend to be uniform across all faculty members w ithin a university,and do not vary for individual “stars, ” although this could change in the future as U.S.

2. Commercialization and Economic D evelopment O ptions

Commercialization EconomicDevelopment

TechnologyLicensing

CorporateR&D

Proof of Concept Centers

Entrepren-eurial

Incubation

LocalD evelopment(services, real

estate)

# # # # #

[ 128 ]


universities intensify their competition for these stars. Even if it does not change, it ispossible that heightened competition for star faculty may lead, over time, to moreuniformity across universities in their mechanisms to support commercialization andtheir royalty-sharing arrangements, because, as it is now, we understand (again, we arenot aware of a study that documents this) that there currently is considerable variationacross universities in these arrangements. Shortly, we w ill suggest that universities arebeginning to compete on yet another dimension—through innovations in the ways thatuniversity-related technologies are commercialized—and that this could have significantpositive benefits for both them and for society (nationally and globally).

In addition, because there is a strong correlation between the presence of starscientists at universities and entrepreneurial startups and other local commercial

activity,6 local university trustees may press universityadministrators to recruit star faculty w ith both strongresearch and commercialization track records (in additionto faculty in non-scientific fields, who, though they mayafford no commercial opportunities for the university, stillcan enhance a university’s prestige among faculty at otheruniversities and among students).

The same competitive forces that are driving U.S.universities to compete for star faculty are increasinglyevident on the global stage. In particular, universitiesoutside the United States that w ish to attract star facultyw ith successful commercialization records who alreadyhave or are seeking positions at U.S. universities must beable to offer at least roughly similar terms as those facultymembers can receive from U.S. institutions. A lready, other

countries have laid the groundwork for this competition by enacting their own versionsof Bayh-Dole. Universities in China and India are actively competing for corporate R&Dfunding, which can be and is used to attract faculty from elsewhere or to prevent starfaculty from leaving. Singapore, in its well-known bio-technology initiative, and,increasingly, universities in the oil-rich M iddle Eastern countries (new ones and thosepartnering w ith foreign institutions), are using their ample government funds for the

6. Lynne Zucker and M ichael Darby, in David Audretsch, Robert E. Litan, and Robert Strom, ed., Openness andEntrepreneurship, “Star Scientists, Innovation, and Regional and National Immigration” (Edward Elgar, 2008,forthcoming).

Universities outside theUnited States that wishto attract star facultywith successfulcommercializationrecords who alreadyhave or are seekingpositions at U.S.universities must be ableto offer at least roughlysimilar terms as thosefaculty members canreceive from U.S.institutions.

[ 129 ]


same purpose. Even European universities, historically reluctant to engage in any aspectof commercialization, may soon be compelled by the increased global competition forfaculty, students, and research funding to join the commercialization race in somemanner (and indeed, the British universities already have).

Chart 2 illustrates a second way in which universities also are engaged incommercialization activities, through what we have labeled “economic development. ”Our discussion of these activities w ill be focused only on U.S. universities—those weknow best—though we are anxious to learn from this audience of similar ventures atuniversities in other countries.

In contrast to technology licensing, corporate-funded research and proof-of-concept centers, whose economic benefits may accrue w idely to a broad populationoutside the university,7 the “economic development activities” depicted in Chart 2 aremeant primarily to benefit the local communities in which universities are located.Furthermore, these development activities may or may not commercialize newknow ledge.

For example, different kinds of “entrepreneurial incubation” programs arespreading at U.S. universities. Typically, these programs provide mentors—oftenentrepreneurs as well as (or in place of) university faculty—and networks, includingaccess to angel and venture capital investors, to assist university students or faculty, oreven local entrepreneurs who may have only a loose connection to the university, in theformation and growth of new companies. To the extent these programs succeed, theyare likely first to benefit the community in which the university is located and,secondarily, a broader population.

Various forces drive these entrepreneurial incubation efforts. In some cases, theinitiative derives entirely from an entrepreneurial founder, such as the late GeorgeKozmetsky at the University of Texas’ well-known “ IC-squared” program; A lec Dingeeat MIT’s “venture mentor” initiative; or Desh Deshpande, the funder and the idealeader behind MIT’s Deshpande Center. Indeed, as we discuss again shortly, noentrepreneurial incubation effort can be successful w ithout an entrepreneurial founderor leader.

But other, more competitive reasons may be at work as well. The founders andthe universities that host these initiatives may want to impress local leaders, state

7. Local communities may and very likely do benefit from university commercialization, but local economic developmentis not the central object of the various commercialization activities.

[ 130 ]


legislators (in the case of public universities), and alumni w ith “how relevant” theiractivities are to local area development, in order to attract greater funding to theuniversity. The universities also may anticipate future contributions from successfulentrepreneurs who benefit from these programs. W ith more funding, the university is ina stronger financial position to attract star faculty and students, or undertake otherinitiatives aimed at improving the university’s prestige.

A different competitive dynamic is at work when universities use theirendowments, faculty resources, and alumni networks to promote local economicdevelopment in various ways: by operating elementary or secondary schools, offeringhealth care to neighboring populations, and by various real estate developmentprojects. In the United States, such activities appear to be most common for universitieslocated in distressed urban areas, w ith the typical urban problems: high crime, poor K-12 education, and declining real estate values. In part, universities engage in suchactivities, which are unlikely to entail the commercialization of new know ledge, as away of providing on-the-job experience for students and faculty. But universities locatedin distressed areas also may need to invest in surrounding areas in order to enhancetheir attractiveness to faculty and students who have options to attend or work athigher educational institutions located in more desirable locations.

In sum, competition among universities w ithin countries and, increasingly,between universities in different countries, is driving many of them to be engaged inone or more “economic development” activities that extend beyond the traditionaluniversity functions of generating and disseminating new know ledge. C learly, thegreater the ambitions of the university, its trustees, faculty, and funders (oftengovernments), then the greater w ill be the competitive imperative. But, having saidthat, universities, like firms in competitive markets, have a choice as to how they wantto compete.

In terms of Chart 2, for example, universities may seek to commercialize (toearn revenue, attract/retain faculty and students) by licensing faculty-discoveredtechnologies and/or by engaging in research funded by corporations and/or bysponsoring proof-of-concept centers. W ith respect to more local economicdevelopment, universities may engage in one or more entrepreneurial incubationefforts, assist in providing mentoring services, and/or pursue real estate development.We suspect that few universities w ill engage in all of these activities, but that, like mostfirms, w ill seek to specialize in one or a few of them.

[ 131 ]


What determines where universities w ill “pick their spots” to compete? Hereagain, universities are unlikely to differ from for-profitfirms. Management strategists advise firms to concentrateon their “ core competences, ” and not to stray too farinto unknown or untested markets or activities. The sameadvice seems apt for universities, as well.

Thus, a more active technology licensingprogram—subject to the qualifications we w ill outlineshortly—makes sense only for universities w ith lots oftechnology “on the shelf, ” as it were, waiting to belicensed or commercialized, or w ith faculty having strong commercialization records.Likew ise, efforts to persuade corporations to provide research funding or to supportproof of concept centers only make sense if universities have the distinguished faculty,and therefore students, that can attract such funding and successfully carry out theresearch for which it may be provided.

Indeed, when it comes to competitive strategy, “ core competence” is all aboutpeople, or talent. If a university has the talent for any of the various commercializationor economic development strategies we have identified, then that w ill largely define itscompetitive strategy.

What about acquiring talent if it is not already there? This question may beespecially important to universities outside the United States that have not yet had theexperience w ith any one or all of the commercialization and/or economic developmentstrategies just outlined.

C learly, “buying talent” is easier to do where the university already has somecompetitive strength and desires to add to it. Star scientists from other universities areless likely to move if they w ill be alone, or have to start a program from scratch, than ifsome future (or current) colleagues are already present. In addition, the further afield auniversity stretches, the greater are the risks in blending in the new “acquisitions” w iththe prevailing culture (unless, of course, university leaders deliberately seek to changethat culture through an acquisition strategy).

Another challenge that universities face is managing whatever entrepreneurialendeavors it chooses to undertake. Take, for example, efforts at entrepreneurialincubation. From where we sit, most of the successful ventures of this type seem to bedriven from “ the bottom up, ” by one or more entrepreneurial leaders who may or may

Management strategistsadvise firms toconcentrate on their“core competences,” andnot to stray too far intounknown or untestedmarkets or activities.

[ 132 ]


not have tenured faculty appointments, but who generally do have some affiliation w iththe university.8 Yet, precisely because these leaders may not be tenured and because, by nature, entrepreneurial incubation typically involves individuals from variedbackgrounds, such efforts do not easily fit w ithin a single university department. Thechallenge for university administrators nonetheless is to nurture these efforts w ithoutoffending particular faculty or departments, and ideally to enlist the support andencouragement of as many qualified university faculty and employees as possible.

Another challenge where we expect continued innovation and competition inthe future is the management of technology licensing. As we mentioned earlier, thepassage of Bayh-Dole in the United States led to the formation of TLOs or TTOs tocentralize and bring economies of scale to the university’s technology licensing activities.Ideally, TLO officials identify technologies suitable for commercialization, potentialparties interested in licensing them or launching entrepreneurial ventures surroundingthem, and then negotiating licensing or other relevant agreements required tocommercialize them. There are a number of highly successful TLO offices that have therequisite personnel and resources to carry out these functions efficiently and effectively.

However, too often in our view, university administrators and trustees havegiven TLO impossibly difficult missions—to generate substantial profits for the universityand soon—w ith insufficient numbers of people w ith the right combination of skillsrequired to perform at peak levels. These kinds of mandates can drive TLOs to have a“home run mentality”—to search for and then spend much, if not most, of their effortson commercializing the few technologies that seem to promise the highest payoffs, orthe “home runs. ” Not only can this strategy shortchange many other university-developed technologies that have strong commercial potential, but it does not evenguarantee the “home runs” themselves, since TLO personnel may not be in the bestposition to judge, or have the industry network to help them judge, whether aparticular discovery w ill or w ill not lead to a home run. In addition, the bureaucraticprocedures that are common to TLOs (and to universities themselves) can slowcommercialization, frustrating entrepreneurial faculty and delaying the benefits of theirdiscoveries for the consumers for whom they are intended.

Accordingly, we have urged university leaders to experiment w ith othercommercialization models: allow ing other commercialization “agents” to compete w iththe university TLO , forming multi-university TLOs to generate economies of scale and to

8. Indeed, it would be surprising to find tenured individuals—who gain that status through research rather than hands-on entrepreneurial experiences—to lead or have an interest in devoting significant time to entrepreneurial incubation.

[ 133 ]


take advantage of industry-specific expertise at other institutions, or even givinguniversity faculty the intellectual property to their discoveries and relying on their post-success donations to the university as the (more than) equivalent of up-frontcompensation for the IP rights and the ability to commercialize w ithout the involvementof the TLO .9

There are signs that U.S. universities and even state officials are beginning torecognize the virtue of this kind of experimentation. We have heard at this conferencethe decision by M ichael Crowe, the president of Arizona State, to permit the university’sdepartments to experiment w ith different technology commercialization models. TheUniversity of Washington is trying a similar approach w ith its engineering school.

In Texas, Governor Perry has proposed that all public universities make thecommercialization of research one of the several factors considered when grantingtenure to professors. Significantly, Texas is measuring commercialization not by licensingrevenue but instead by counting the volume of innovations moved to the marketplace.State officials also have requested that the words “ technology commercialization” and“economic development” be added to university and college mission statements. In2006, Texas A&M University became what is believed to be the first public university inthe United States to formally incorporate commercialization into its criteria for grantingtenure to professors. That change appears to have led to a marked increase in patentapplications filed by tenure-track faculty at the university (although time w ill tellwhether the Texas A&M policy may unintentionally lead to excessive patenting by theuniversity, which could slow overall commercialization).

Meanwhile, at Kauffman, we have received inquiries from other universities, orthose affiliated w ith them, about how to go about pursuing one or more of thealternatives to the current technology commercialization model we have just identified.

If these experiments prove successful—and we believe they w ill be—theyshould begin to change the way technology licensing has been traditionally practiced,and more importantly, identify the additional pathways that must be utilized to supportcommercialization and entrepreneurship. Star faculty understandably w ill be attracted tothose schools that offer them greater freedom—and potentially greater rewards—incommercialization than other schools that do not. Eventually, what may start as“experiments” in commercialization at a few schools should spread to many others.

9. Litan, M itchell, and Reedy (2007). At Kauffman, we have launched an Internet platform, www.ibridgenetwork.org,which offers participating universities the ability to showcase their technologies for potential matches w ithentrepreneurs and capital sources that may be interested in commercializing them.

[ 134 ]


If new approaches to technology commercialization begin to diffuse morew idely throughout the university world—most likely beginning at first in the UnitedStates but ultimately finding their way to leading schools in other countries—society(national and global) should benefit in at least two ways.

First, the new models should be “ w in-w ins”—in that society gets moreinnovation, more rapidly, while universities also should realize higher returns (countinglicensing revenue, donations, and any other revenues that may be derived fromcommercialization activities).

Second, American higher education, in particular, may benefit in another way,as well. It recently has been noted that endowments among universities are increasinglyconcentrated in the Ivy League and other “rich universities. ” Table 1 illustrates thispoint, providing the top twenty-five-ranked universities by size of endowment. Somemay argue that this grow ing concentration of wealth and, thus, faculty talent, is a goodthing, because it permits the richer universities to take advantage of economies of scalein physical research facilities and to realize the “agglomeration benefits” of havingmany talented researchers in such close physical proximity.

The U.S. experience runs counter to this, however. W ithout disputing thepresence of these agglomeration benefits, there are offsetting benefits to a society ofdiversity—having talented researchers, all competing w ith one another, at manydifferent locations (both w ithin and outside the United States). Different locations andcultures give rise to differences in perspectives, which are important for promotinginnovation, especially “radical” or “disruptive” innovation. Where resources and talentsare too concentrated, inquiry can be subject to too much “group think. ” Fortunately,the United States is large enough and rich enough to host many centers of excellencethat can counteract group think.

In fact, if one looks at the universities that have been the most successful thusfar in technology commercialization, the list looks very different than the one shown inTable 1. Table 2 provides the top twenty-five U.S. universities ranked by total licensingrevenue during 2006, w ith their ranking on the endowment top twenty-five listed inparentheses by each school. We admit that licensing revenue is an imperfect measure ofcommercialization, or, more precisely, the total social benefits of universitycommercialization. Nonetheless, it does provide a rough guide to how active andsuccessful universities are in commercialization activities. And, as Table 2 illustrates, few

[ 135 ]


of the most richly endowed schools listed in Table 1 are present in the list of the mostsuccessful universities in technology commercialization, and vice versa (and for thoselisted in both tables, the rankings tend to differ between the two lists).

We point all of this out to suggest that not only is technologycommercialization an important force that counteracts the ability of the most richlyendowed institutions to attract and retain the “best ” faculty, but if the schools thatexperiment most aggressively w ith alternative approaches to commercialization comefrom outside the “rich list ” of endowed schools, as we suspect w ill be the case, thenthe counter-force provided by commercialization should exercise a more equalizingimpact in the future than it already has. We believe this is good for higher educationand good for U.S. society.

In sum, universities in the United States and elsewhere around the worldclearly are in the “economic development” business, and are likely to be more so in the future. This trend should benefit the broader societies that support and drawsustenance from universities. And we owe it all to a more competitive environment, one that globalization is making possible.

The challenge for universities now is to figure out where they want to play inthe economic development arena. They are likely to be most successful, in our view, ifthey play to their strengths, and if they permit and ideally encourage the “bottom up”entrepreneurial endeavors that may come to them from their faculty, students, alumni,and other supporters.

[ 136 ]


Table 1: Top Twenty-five Universities by Size of Endowment, 2006

Institution 2006 Endowment Funds

1 Harvard University $28,915,706,000

2 Yale University $18,030,600,000

3 Stanford University $14,084,676,000

4 University of Texas System $13,234,848,000

5 Princeton University $13,044,900,000

6 Massachusetts Institute of Technology $8,368,066,000

7 Columbia University $5,937,814,000

8 University of California System $5,733,621,000

9 University of Michigan $5,652,262,000

10 The Texas A&M University System and Foundations $5,642,978,000

11 University of Pennsylvania $5,313,268,000

12 Northwestern University $5,140,668,000

13 Emory University $4,870,019,000

14 University of Chicago $4,867,003,000

15 Washington University – St. Louis $4,684,737,000

16 Duke University $4,497,718,000

17 University of Notre Dame $4,436,624,000

18 Cornell University $4,321,199,000

19 Rice University $3,986,664,000

20 University of Virginia $3,618,172,000

21 Dartmouth College $3,092,100,000

22 University of Southern California $3,065,935,000

23 Vanderbilt University $2,946,392,000

24 Johns Hopkins University $2,350,749,000

25 University of Minnesota and Related Foundations $2,224,308,000

Source: National Association of College and University Business Officers, 2006 NACUBO Endowment Study (2007).

[ 137 ]


Table 2: Top Twenty-five Universities by Licensing Revenues, 2006

Institution 2006 License Revenues

1 University of California System (8) $193,499,879

2 New York University $157,412,824

3 Stanford University (3) $61,310,739

4 Wake Forest University $60,588,512

5 University of Minnesota (25) $56,193,050

6 Massachusetts Institute of Technology (6) $43,500,000

7 University of Florida $42,900,000

8 University of Wisconsin – Madison $42,363,611

9 University of Rochester $38,016,557

10 University of Washington $36,199,485

11 Northwestern University (12) $29,990,550

12 University of Massachusetts $27,183,583

13 Harvard University (1) $20,849,993

14 University of Michigan (9) $20,438,727

15 Emory University (13) $17,790,432

16 University of Iowa $16,912,938

17 University of Georgia $16,805,484

18 University of Utah $16,295,064

19 Johns Hopkins University (24) $13,938,457

20 California Institute of Technology $13,234,236

21 University of Texas Southwestern Medical Center $12,277,436

22 Washington University – St. Louis (15) $11,582,912

23 Rensselaer Polytechnic Institute $10,837,438

24 Case Western Reserve University $10,794,377

25 University of Illinois – Urbana-Champaign $10,222,735

Source: Association of University Technology Managers.

[ 138 ]

Economists have well established that new

knowledge, when successfullycommercialized, is the leadingcause of growth in economiesat or near the “technologicalfrontier” (or beyond the point

where technology can beborrowed or bought fromelsewhere and combined with investment in new

capital goods).

s u m m a r y o f d i s c u s s i o n

[ 139 ]


Summary of D iscussion

O nce each session’s presentations were finished , speakers and audience

alike engaged in a lively discussion of the issues raised .

In the first session, three presidents of European universities outlined thechallenges in navigating their institutions through changing times. A consistent themeemerged: These European administrators envy, and seek to replicate, the relativefreedom from government regulation and intervention enjoyed by their Americancounterparts.

The subsequent discussion focused largely on the differences between theAmerican and European systems of tertiary education, and on ways that Europe’suniversities are changing to become more like America’s.

First and foremost, private universities are far more common in the UnitedStates than in Europe, where most universities remain fundamentally state entities. And, even the public universities in the United States receive some or most of theirfunding from non-government sources, making the distinction less black and white.That gives American universities extraordinary freedom and flexibility—traits that theEuropean educators openly professed to admire.

The European participants did, however, stress that their universities are strivingto diversify their funding sources. The days of 100 percent government funding arealready over, but the level of private support still has not grown to anything nearAmerican levels. U.S. universities enjoy many legal and tax advantages that makefundraising much easier for them. And the endowment—a staple of Americanuniversities, public and private—is only just beginning to be used as a serious tool inEurope. Overall, the European participants agreed that a movement away from statesupport and toward more private sources of funding w ill be healthy for Europeanuniversities.

A second theme that emerged is the extent to which, in a sense, the Americanand European education systems are mirror images of each other. That the Americansystem of tertiary education is far superior to Europe’s, nearly all the discussants—American and European alike—agreed. On the other hand, all also agreed that Europe’sprimary and secondary schools generally do a better job than their Americanequivalents.

[ 140 ]


A lan Merten, the president of George Mason University, iterated some of thereasons for the disconnect on the American side. First, there is competition—forstudents, for faculty, for resources—at the university level. The public school systemsoperate more or less as monopolies w ithin their defined geographical areas. Second,universities can offer merit pay for faculty, something that nearly all teachers’ unioncontracts forbid at the primary and secondary levels. Third, and similarly, universities canpay their faculty differently according to specialty. This, again, is not allowed by mostpublic school labor agreements—a factor which makes it difficult (for instance) toattract and retain qualified science teachers, who can be lured away by the highersalaries more prevalent in other fields that need their expertise. Finally, universities—public as well as private—enjoy substantial autonomy. Public elementary and highschools (some three-quarters of U.S. schools), on the other hand, are mostly dominatedby state-level education laws and bureaucracies that limit management’s flexibility.

European universities by and large lack these advantages. The discussion thenturned to the extent to which that is changing. Axel Freimuth of the University ofCologne noted that German universities are working to create a new salary structurefor faculty; the current system is still far too restrictive. Wolfgang Herrmann of the

Technical University of Munich interjected that the systemis nonetheless getting better, and cited some success inattracting private sector subject matter experts (forinstance, in engineering and science) to teach at Europeanuniversities. Another related push, though much smaller inscope, is to encourage faculty to try their hand inbusiness, and bring that experience back into theclassroom.

Still, there is a dearth of qualified math, science,and engineering faculty and graduates. A ll the Europeaneducators agreed that Europe must do a better job ofinspiring students to enter these fields, both to ensure the

continued transmission of important know ledge, and to promote entrepreneurialactivity in vital technical fields.

A final difference between the two systems is the prevalence in America ofcommunity colleges and other non-university forms of tertiary education. Essentially, thesesystems allow the United States to educate more students, in ways more geared to theirinterests and abilities. Europe’s system is more “university or nothing,” thrusting some

All the Europeaneducators agreed thatEurope must do a betterjob of inspiring studentsto enter these fields,both to ensure thecontinued transmissionof important knowledge,and to promoteentrepreneurial activityin vital technical fields.

[ 141 ]


students into environments for which they are unprepared and unsuited, while leavingothers out altogether.

The day’s second discussion followed talks by Jan W illem Oosterw ijk of ErasmusUniversity Rotterdam and Manuel Trajtenberg of the University of Tel-Aviv. Thesethoughtful presentations focused on the specific ways that universities can fosterentrepreneurship in the societies around them, and on their own campuses.

These efforts are difficult. For instance, there is significant internal politicalopposition to making the university take a more direct role in outside entrepreneurship.Faculty members in particular tend to view any such effort as inevitably leading to thesubordination of the university’s mission to business interests. University leaders stronglyreject that charge, but admit that effectively rebutting it can be hard.

Another important obstacle is the aging nature of European societies. AsEuropean countries age, political pressure to spend more on pensions and retirementincreases, and the appetite for allocating resources to education decreases.

This creates something of a vicious cycle. As Trajtenberg noted, aging societiesabove all need high growth to fund their social services programs for seniors. But in themodern world, high growth is fundamentally driven by innovation, which in turn is drivenby education. So some significant resources—public and private—need to be committedto this sphere to help ensure the economic growth necessary to sustaining an agingpopulation.

One way that American universities are becoming more entrepreneurial is bybecoming more global. They are establishing campuses abroad and partnering up w ithforeign institutions for research and teaching purposes. European universities, on theother hand, lag behind in these efforts. The Europeans in the discussion acknow ledgedthe gap, but argued that Europe understands the importance, and is working to catch up.In a sense, the Europeans have no choice. For a long time, they have watched as many oftheir best students and faculty end up overseas—particularly in the United States. W ithAmerican universities now actively establishing beachheads in Europe and around theworld, this “poaching” of talent w ill only accelerate, and Europe needs to compete.

While discussions of talent often focus on science and engineering, severalparticipants noted that innovation is about much more. There are supply chaininnovations, efficiency innovations, and innovations stemming from products and servicesthat are not technical in nature. In fact, Bob Litan pointed out that 80 percent of thefastest-grow ing companies in the United States are not technology companies.

[ 142 ]


The HOPE program, described in detail in Oosterw ijk’s presentation, was theone major effort by a university to foster entrepreneurship to be discussed at length. Assuch, it served as a sort of “ case study. ” Oosterw ijk presented a very simple measure ofsuccess for the program: real entrepreneurial activity by students who have completedthe course. “To create entrepreneurial motivation is the #1 purpose of the HOPEprogram—to teach that it is fun to be entrepreneurial, and also to teach students todeal w ith failure, ” Oosterw ijk said.

In the end, however, all agreed that entrepreneurship resists any formulaicanswers. Certain ideas can help—for instance, the establishment of a “Phoenix Award”for an entrepreneur who failed once, tried again, and succeeded. Role models also canmake a difference, but that can be a double-edged sword. For instance, some of thebest known and most successful entrepreneurs in recent years (e.g., Bill Gates) were

college drop-outs. But dropping out of school—while itmay be the right decision for a few—is not somethinganyone should want to promote.

Ultimately, entrepreneurship results from amixture of innate personal characteristics (that noteveryone shares) and a culture that can encourage thosecharacteristics where they exist. Universities should focusless on teaching entrepreneurship—something that is hardto do in the best circumstances—and more on changingthe balance of rewards and incentives w ithin business andsociety to make them friendlier to entrepreneurship.

M ichael Crow, the president of Arizona State University (ASU), gave the finaltalk of the first day. The discussion that followed focused mostly on the ways in whichCrow is shaking up his school.

First of all, Crow reiterated a key theme from earlier in the day: “Public ”universities are no longer really completely public, at least not in the sense that suchuniversities receive all or even most of their resources from government. Of ASU’s $2 billion budget, only 20 percent comes from the state; the rest is raised from privatesources. In fact, as Crow was at pains to stress, the distinction between public andprivate universities is close to meaningless today. The qualities of a university’s ideas,faculty, and programs are what matter. In the end, all schools are chasing the same dollars.

Ultimately,entrepreneurship resultsfrom a mixture of innatepersonal characteristics(that not everyoneshares) and a culturethat can encouragethose characteristicswhere they exist.

[ 143 ]


However, the public/private distinction is not entirely meaningless. Even thatrelatively small share of funding comes w ith strings. Rather than lament that, however,or seek to change it, Crow has chosen to embrace the strings. Unlike the University ofArizona, which is competitive, ASU has, by state law, an open admissions policy. Formany top faculty this is a disadvantage, but for others it is a selling point. Someteachers get excited by the prospect of teaching students w ith a range of abilities, andASU actively recruits those teachers.

The question most on the audience’s mind was simple. At most universities,the faculty really runs the place while the president raises money. But Crow really doesrun ASU. How does he do it?

Crow forthrightly said that he chose to pick an intellectual fight. On the merits,he was certain that his reform agenda had value. As long as he kept the argumentintellectual and civil, if and to the extent that opponents became emotional, they lost.He also found that direct appeals to self interest worked wonders: When he took overASU, faculty salaries were tenth among schools in the Pacific-10 conference; now theyare fourth.

Another secret to his success is to encourage innovation from the bottom upand allow it to happen. Crow is famous for the ways he has shaken up themanagement and structure of ASU. Less famous, but no less important, are all theproposals that have emerged, not from the president’s office, but, as it were, in thefield—initiatives that Crow then has championed and implemented.

To Crow, changing ASU to be more entrepreneurial in the way it operates is animperative. It is still a young university—and moreover, it is the only one in a vast andgrow ing metropolitan area. Not to change w ith the changing circumstances all aroundthe school would be suicidal.

The focus of the second day’s first session was on technology and how it ischanging the university’s mission and functions.

To some extent, this can be seen in the way that the old concept of theuniversity as a place—defined by Cardinal Newman in the classic book The Idea of aUniversity—is being redefined. The Internet supposedly meant the death of distance,but, in fact, we have found that, as ever, humans like human contact. A purely virtualuniversity system w ill probably never become reality. Second, as Newman observedmore than 150 years ago, there are advantages to working and living in clusters—advantages that accrue to this day.

[ 144 ]


That’s not to say that technology is having no impact. On the contrary, distancelearning is more possible and more prevalent than ever. Some of the world’s bestteachers record their lectures on a variety of multimedia platforms, and some evensimulcast them live. Technology improves so rapidly that no one really knows what theteleconferencing of tomorrow w ill look like. It’s possible that the most renownedlecturers in the country—indeed in the world—could become, through technology, theteachers of students everywhere.

Interestingly, in other ways it is the non-technical disciplines that have so farproven themselves more adept at adapting to new technologies than technical fieldslike engineering and the sciences. Presenter Bill Wulf noted that in the hard sciencesand engineering, scholarship is still dominated by the same paper journals andlongstanding professional associations that have defined the fields for decades. In thehumanities, on the other hand, the proliferation of niche specialties has led to thecreation of new associations and more cost-effective “e-journals. ”

The discussion closed w ith a note of disagreement. Prior presentations anddiscussions had mostly taken for granted that a funding mix that is largely private isgood for the university. Wulf and others questioned whether this was truly the bestformula for the university. To some extent, they argued, public spending on education is a measure of a society’s commitment to education as a public good. A ll agreed,however, that, so long as the current mix stands, all universities—European ones inparticular—are going to have to get better at raising private money.

The day’s second session focused on the extent to which universities arebecoming more global in reach and scope. Partly because the two presentations—oneby George Mason University President A lan Merten, the other by biomedical researcherFrank Douglas—were so different, the discussion that followed was freewheeling and abit disjointed.

Dr. Douglas’ presentation outlined an ambitious plan to get every relevantinstitution—from universities to research labs to hospitals to big pharmaceuticalcompanies to small biotech startups—in one state (Massachusetts) to work together ona cancer cure. In the discussion, he asserted that a unifying cause is often the bestdriver of new discoveries. For instance, the Manhattan Project and the Apollo programeach had but one goal. But, in leveraging so many people and institutions to worktoward that goal, they not only achieved what they set out to do, they made manypath-breaking discoveries in many fields along the way. The problem w ith currentcancer research efforts is, in part, that they are too scattered, disjointed, and unfocused.

[ 145 ]


President Merten was questioned w idely on the implications of “globalizing”the university—both his own specific school and the university in general. For instance,George Mason University has opened a campus in the United Arab Emirates (UAE).Different cultural norms can make such joint projects delicate. However, problems havenot yet arisen because the UAE campus is located in afree trade zone where many of the rules and laws thatgovern the rest of society do not apply. However, culturalconsiderations like these could come more to the fore inother countries.

In the course of the discussion, it also emergedthat universities on each side of the divide seek differentthings from global partnerships. Overseas schoolsprimarily want to partner w ith American universities tobenefit from their teaching expertise. Americanuniversities, on the other hand, are more interested infurthering their research mission, in benefiting from beingexposed to different cultures and perspectives, and inestablishing “people-to-people” contacts. The latterespecially is a hugely useful tool for deepeningunderstanding across some otherw ise treacherouspolitical and social divides. American universities also believe that they could be usefulsources of dispassionate analysis on their host country’s policies. But, so far, hostgovernments have not embraced this idea.

The final session focused on the extent to which universities should actively tryto foster economic development. Despite universities’ historic unease w ith this role,presenters Bob Litan and Lesa M itchell unambiguously argued that universities shouldovercome that unease and embrace the roll.

Hardly anyone disagreed. The resulting discussion focused on “how:” How canthe goal be best achieved, all the while overcoming resistance from universitypersonnel, particularly the faculty?

A number of ideas were proposed. One of the more promising was to “goldenhandcuff ” research faculty by giving them operational control of research money, aswell as the prospect of reward if the fruits of their research are successfullycommercialized.

O verseas schoolsprimarily want topartner with Americanuniversities to benefitfrom their teachingexpertise. Americanuniversities, on the otherhand, are moreinterested in furtheringtheir research mission, inbenefiting from beingexposed to differentcultures andperspectives, and inestablishing “people-to-people” contacts.

[ 146 ]


Another suggestion—already in place at several universities—is for schools tolease excess space to private companies that work in fields related to the university’sresearch mission. The synergies created can often help both the companies and thefaculty further their missions.

Concerns that the imperatives of business could take over and distort auniversity’s mission are not misplaced. But safeguards could mitigate the potential forabuse.

For instance, to the extent that university research projects end upcommercialized, it’s important that universities not fold the revenues into theiroperating budgets. That would just create pressure and incentives to increase thoserevenue streams—incentives that could steer the university’s focus away from its coremission. It’s better to fold revenues from such projects into the endowment.

Another important measure would be to use some of those revenues to fundresearch and teaching in areas w ith little or no prospect for commercialization. Thiswould meet most faculties’ core concern: that commercial projects could bleedresources away from unprofitable but culturally and intellectually vital fields ofknow ledge.

In the end, however, private money is always going to be more productivethan public or non-profit sector money in producing and commercializing innovation.Universities’ core function is and should remain the production of new know ledge, andthe preservation and dissemination of existing know ledge. By fulfilling that corefunction, the university can help the private sector generate entrepreneurship. But italways should yield first position in the race to the private sector.

4801 ROCKHILL ROADKANSAS CITY, MISSOURI 64110

816-932-1000www.kauf fman.org

10081000RP

Documents

THE FUTURE OF TH - Ewing Marion Kauffman Foundationentire industries—Stanford and the Silicon Valley being the shining examples. All of the presenters touched on this topic to some